Federal bank regulatory agencies have finalized principles that establish a broad framework for effectively managing financial risks related to climate change for large financial institutions. These principles align with the risk management framework outlined in the agencies’ existing rules and guidance. They specifically target financial institutions with total assets of $100 billion or more and cover both physical and transition risks associated with climate change.
The aim of these principles is to assist the largest financial institutions in focusing on crucial aspects of managing climate-related financial risks. They provide general guidance on climate-related financial risk management concerning governance, policies, procedures, limits, strategic planning, risk management, data, risk measurement, reporting, and scenario analysis. Furthermore, the principles outline approaches for addressing climate-related financial risks within traditional risk areas like credit, market, liquidity, operational, and legal risks.
Importantly, these finalized principles do not prohibit or discourage large financial institutions from providing banking services to any specific class or type of customers, as long as they comply with applicable laws and regulations. The authority to decide whether to grant a loan or open, close, or maintain an account rests with the financial institution.
The final principles largely resemble the draft principles released by the agencies, but they have incorporated clarifications based on feedback from commenters.
Please refer to the provided links for more detailed information:
– Federal Register notice: Principles for Climate-Related Financial Risk Management for Large Financial Institutions (PDF)
– Board memo: Interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions (PDF)
– Summary of Final Principles for Climate-Related Financial Risk Management for Large Financial Institutions (PDF)
– Statements by Chair Jerome H. Powell, Vice Chair for Supervision Michael S. Barr, Governor Michelle W. Bowman, and Governor Christopher J. Waller
For media inquiries, please contact:
– Darren Gersh (Federal Reserve Board) at 202-452-2955
– Julianne Fisher Breitbeil (FDIC) at 202-898-6993
– Carrie Moore (OCC) at 202-649-6870
Read the original Federal Reserve release here.
