The Federal Financial Institutions Examination Council (FFIEC) updated the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual, which provides instructions to examiners for assessing the adequacy of a bank’s or credit union’s BSA/AML compliance program and its compliance with BSA regulatory requirements. The updates include a new section on the introduction of customers and three updated sections on charities and nonprofit organizations, independent automated teller machine owners or operators, and politically exposed persons. These sections provide information (and considerations related to certain customers) that may indicate the need for bank policies, procedures, and processes to address potential money laundering, terrorist financing, and other illicit financial activity risks.
Additionally, the Office of the Comptroller of the Currency (OCC) is soliciting academic-focused papers and policy-focused research on climate risk in banking and finance for presentation to the OCC on June 06-07, 2022. Interested parties are invited to submit papers or a one-page extended abstract/executive summary by March 11, 2022. OCC anticipates selecting six to ten papers for presentation and discussion. Areas of interest include but are not limited to:
- Physical risks directly arising from climate change. This would include topics such as flood risk to physical bank collateral, most notably real estate; the effect of other natural disasters on the finance or insurance industry; and the methodology behind the models that predict those risks.
- Transition risks from climate policies, technological innovation, consumer sentiment, or investor sentiment. Net zero goals and their effects on key segments of the finance industry; integrated assessment models and their usage in a climate-risk loss forecasting context.
- Differential community impact. The effect that climate-related risks have on potentially vulnerable communities and their access to financial services.
- Climate risk modeling and stress testing. Methodology and models of approaches that attempt to demonstrate any of these risks on banks and their obligors, along with regulatory experiences with such approaches.
- Environmental, social, and corporate governance (ESG) ratings and regulatory reliance. Derivation of ESG rating methodologies; their effects on investor behavior and capital flows; and regulatory reliance on these ratings across the world.
OCC also published remarks of Acting Comptroller of the Currency, Michael J. Hsu, related to climate change risk. His remarks highlighted five questions that boards of directors of large banks should ask to promote and accelerate improvements in climate risk management practices at their banks. These questions are related to overall exposure to climate change, exposure to carbon tax, vulnerability of data centers and other critical services to extreme weather, potential impact of climate change on counterparties and sectors, and seizing opportunities from climate change.
- FFIEC Press Release
- BSA/AML Manual
- News Release on Climate Risk Research
- News Release on Remarks by Michael J. Hsu
- Remarks by Michael J. Hsu
Keywords: Americas, US, Banking, Bank Secrecy Act, AML/CFT, Climate Change Risk, ESG, Transition Risk, Stress Testing, Carbon Taxation, FFIEC, OCC
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.