Summary:
The Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Board), and the Office of the Comptroller of the Currency (OCC) (collectively, โagenciesโ) are jointly issuing principles that provide a framework high level. for the safe and sound management of climate-related financial risk exposures (โprinciplesโ).
Climate-related financial risks, including physical and transition risks, may manifest within traditional risk areas, including credit, market, liquidity, operational and legal risks.
In December 2021, April 2022, and December 2022, the agencies, respectively, proposed substantially similar guidance on risk management principles to support the effective management of climate-related financial risks for financial institutions they supervise with more than 100 billion dollars in total consolidated assets.
Applicability statement: Other: Although all financial institutions, regardless of size, may have significant exposures to climate-related financial risks, this Financial Institution Letter is directed to the largest financial institutions, those with more than $100 billion in total consolidated assets .
Reflexes:
- These principles provide a high-level framework for the safe and sound management of climate-related financial risk exposures, consistent with risk management frameworks outlined in existing agency standards and guidance.
- The agencies are jointly publishing principles that aim to support the efforts of large financial institutions to focus on key aspects of managing climate-related financial risks in a manner consistent with safe and sound practices.
- The final principles do not prohibit or discourage large financial institutions from providing banking services to customers of any specific class or type, as permitted by laws or regulations. The decision on whether to grant a loan or open, close or maintain an account rests with the financial institution, as long as the financial institution complies with applicable laws and regulations.
- Although all financial institutions, regardless of size, may have significant exposures to climate-related financial risks, the principles are intended for the largest financial institutions, those with more than $100 billion in total consolidated assets.
- The agencies encourage financial institutions to take a risk-based approach when assessing climate-related financial risks associated with their relationships with customers and to consider the financial institution's ability to manage the risk.
- The principles aim to promote a consistent understanding of the effective management of climate-related financial risks. Agencies may consider providing additional resources or guidance, as appropriate, to support financial institutions in prudently managing these risks while continuing to meet the financial services needs of their communities.
Related resource:
Related topic:
The capital markets
