OCC Outlines Climate Risk Standards for Big Banks

Earlier this month, the Office of the Comptroller of the Currency (OCC) requested public feedback on draft supervisory principles designed to support the identification and assessment of climate-related financial risks at large banks.

“Today’s release takes an important, concrete step towards ensuring the safety and soundness of large banks in the face of increasing risks from climate change,” said acting Comptroller of the Currency Michael Hsu in a press release. “We look forward to feedback and to working with our interagency peers to develop more detailed guidance next year.”

The draft principles are for banks with more than $100 billion in assets, and are one of the first examples of guidance from federal regulators on identifying and managing climate-related financial threats. They stipulate that climate-related scenarios should be subject to oversight and quality control standards.

The OCC noted that boards and management should consider climate-related risks when mitigating all types of financial and non-financial risks. The risk assessment principles describe how climate risks can be addressed in risk categories like credit risk, operational risk, liquidity risk, and legal/compliance risk.

Interested parties are requested to submit feedback on the principles by February 14, 2022. The OCC plans to establish subsequent guidance that would distinguish responsibilities for management and boards of directors, as well as incorporate feedback received on the risk-related principles.