Banking agencies release guidance for climate-related financial risk management

The FDIC, Federal Reserve and Office of the Comptroller of the Currency today released interagency guidance for managing climate-related risk at financial institutions with at least $100 billion in assets. The principles are meant to provide a “high-level framework” for large financial institutions as they “develop strategies, deploy resources and build capacity to identify, measure, monitor and control for climate-related financial risks,” according to the document.

During its meeting today, the FDIC board voted 3-2 in favor of guidance. “Climate change-related financial risk poses a clear and significant risk to the U.S. financial system,” said FDIC Chairman Martin Gruenberg. “If improperly assessed and managed, they may pose a threat to safe and sound banking and to financial stability.”

‌FDIC Vice Chairman Travis Hill and board member Jonathan McKernan cast the opposing votes, with both saying there was no justification to elevate climate risk above the other risks that banks face. “We should focus on making sure our banking system is resilient on a range of risks rather than layering ever more stringent expectations around the management of every discreet risk,” Hill said.