Banking Agencies Withdraw Climate Risk Principles, Leaving Banks Vulnerable to Climate Risk Exposure
WASHINGTON, D.C. — Today, the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and Federal Reserve announced the withdrawal of their interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions. This framework for the supervision of climate-related financial risks required banks with over $100 billion in assets to consider climate-related financial risks in business strategy, risk management, and strategic planning.
This move comes after acknowledgement from Federal Reserve Chair Powell of the risks climate change poses to the financial system. Chair Powell testified earlier this year that as a result of climate change, “if you fast forward 10 or 15 years, there will be regions of the country where you can’t get a mortgage, there won’t be ATMs, banks won’t have branches and things like that.”
In response, Elyse Schupak, policy advocate with Public Citizen’s Climate Program, issued the following statement:
“The agencies’ withdrawal of the principles for climate-related financial risk management is an irresponsible and politically motivated move in the wrong direction. The increase in the frequency and severity of climate disasters and the rapidly escalating property insurance crisis mean the agencies should be working harder to understand and mitigate climate-related financial risks faced by banks and the financial system — not backtracking. Effective bank regulation requires looking squarely at all risks to supervised institutions, including climate risks, and addressing them before they have destabilizing effects. This approach, rather than politics, should guide regulator action.
“For the Federal Reserve, capitulation to the politics of climate denial championed by the Trump administration is a threat to both its legitimacy and efficacy, which will be hard to repair. Chair Powell has admitted that the Federal Reserve has done the ‘bare minimum’ on climate — now it will do even less, putting the banks it supervises and the broader financial system at risk.”