As expected, the OCC today issued a set of draft principles providing a framework for climate risk management for banks with more than $100 billion in total consolidated assets. The principles address governance; polices, procedures and limits; strategic planning; risk management; data, risk measurement and reporting; and scenario analysis.
With regard to scenario analysis, the OCC noted that “management should develop and implement climate-related scenario analysis frameworks in a manner commensurate to the bank’s size, complexity, business activity, and risk profile. These frameworks should include clearly defined objectives that reflect the bank’s overall climate risk management strategies.” The principles also address how firms should consider climate-related financial risks when identifying and mitigating all types of risk.
The OCC said it “plans to elaborate on these principles in subsequent guidance that would distinguish roles and responsibilities of boards of directors (boards) and management, incorporate the feedback received on the principles, and consider lessons learned and best practices from the industry and other jurisdictions.” The agency added that it “intends to appropriately tailor any resulting supervisory expectations to reflect differences in banks’ circumstances such as complexity of operations and business models.” Comments on the principles will be due on Feb. 14.