Washington, D.C. — The Office of the Comptroller of the Currency (OCC) today issued proposed supervisory guidance on climate-related risk, marking the first time a federal bank regulator has taken substantive action to stem climate-related financial risk. The OCC will receive comments on the guidance until February 14, 2022.
The OCC regularly releases guidance on how it expects banks to manage the major risks they face, then sends bank examiners to see how banks are implementing those expectations. Recently, financial regulators have finally started to recognize the climate crisis as a risk for banks, and this guidance is a sign that the OCC is moving from recognition to action.
David Arkush, director of Public Citizen’s Climate Program, issued the following statement:
“This guidance, the first of its kind from a U.S. banking regulator, is a critical step toward addressing climate-related risk to financial institutions and the system. We thank Acting Comptroller Michael Hsu for his leadership in issuing it.
“The substance of the guidance is a solid start. It takes the foundational step of recognizing that climate-related risk can threaten the safety and soundness of individual banks and the whole financial system which means it puts the full range of OCC tools on the table, including enforcement authority. The guidance is notable for recognizing that managers may need to limit bank activities to mitigate climate-related risk and instructing bank managers to consider disproportionate impacts on disadvantaged households and communities. We look forward to working with the agency to strengthen the guidance and extend it to all banks under the OCC’s supervision.
“We also need similar action from other bank regulators. Acting Comptroller Hsu should use his seat on the Board of the Federal Deposit Insurance Corporation (FDIC), acting with other members of the Board, to extend this guidance to banks under that agency’s jurisdiction.”
With Americans for Financial Reform, Public Citizen offered a Climate Roadmap for U.S. Financial Regulation in March 2021 that includes recommendations for supervisory guidance.
With additional partners, Public Citizen offered more detailed guidance on incorporating climate-related risk into bank supervision in September 2021 and called on regulators to implement it.
In May 2021, Arkush published Unsafe at Any Charge: Why Financial Regulators Should Actively Mitigate Climate-Related Risk, making the case for why bank regulators should take climate-related risk it seriously as a threat to safety and soundness and financial stability—and why doing so involves limiting bank activities.