Regulators Unveil Climate Risk Principles for Big Banks

Federal bank regulatory agencies have joined forces to finalize principles that establish a comprehensive framework for managing climate-related financial risks at large institutions. Aimed at safeguarding against both physical and transition risks stemming from climate change, these principles are set to guide the nation’s largest financial institutions, those with $100 billion or more in assets.

The principles, which align with existing risk management frameworks, emphasize governance, strategic planning, and scenario analysis. They outline how climate-related financial risks should be integrated into traditional risk areas such as credit, market, liquidity, operational, and legal risks.

While the final principles do not restrict lending or account services to any specific customer class, they stress the importance of compliance with applicable laws and regulations. The agencies also clarify that these principles are substantively similar to their draft versions, incorporating feedback from commenters.

These new guidelines are a significant step forward in the ongoing efforts to ensure that the financial system remains resilient against the challenges posed by climate change. Experts believe they will help financial institutions identify and mitigate risks, ultimately protecting both the economy and consumers.

The principles were released by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency. For more information, contact Julianne Fisher Breitbeil at the FDIC, (202) 340-2043.