Featured Product

    FDIC Publishes Draft Principles on Climate-Related Financial Risks

    The Federal Deposit Insurance Corporation (FDIC) is consulting on the statement on principles for the management of climate risk by large financial institutions, with comment period ending on June 3, 2022.

    The draft principles are targeted at the largest financial institutions, those with over USD 100 billion in total consolidated assets. The draft principles are intended to support efforts by large financial institutions to focus on key aspects of climate-related financial risk management and provide a high-level framework for the safe and sound management of exposures to climate-related financial risks. The draft principles will help address key questions on climate exposures and incorporate climate-related financial risks into the risk management frameworks of financial institutions. The draft principles cover aspects related to governance; policies, procedures, and limits; strategic planning; risk management; data, risk measurement, and reporting; and scenario analysis. The principles stipulate the following:

    • Material climate-related financial risk exposures should be clearly defined, aligned with the institution’s risk appetite, and supported by appropriate metrics (for example, risk limits and key risk indicators) and escalation processes.
    • Tools and approaches for measuring and monitoring exposure to climate-related risks include, among others, exposure analysis, heat maps, climate risk dashboards, and scenario analysis. These tools can be leveraged to assess an institution’s exposure to both physical and transition risks in both the shorter and longer term.
    • Since data, risk measurement, modeling methodologies, and reporting continue to evolve at a rapid pace, management should monitor these developments and incorporate them into their climate risk management as warranted.
    • Management should develop and implement climate-related scenario analysis frameworks in a manner commensurate to the institution’s size, complexity, business activity, and risk profile. These frameworks should include clearly defined objectives that reflect the institution’s overall climate risk management strategies.
    • Management should identify emerging risks that could be related to credit, liquidity, operational, legal and compliance, and other financial and nonfinancial risks; it should develop and implement appropriate strategies to mitigate these risks.
    • Effective credit risk management practices could include monitoring climate-related credit risks through sectoral, geographic, and single-name concentration analyses, including credit risk concentrations stemming from physical and transition risks.

    FDIC plans to elaborate on these draft principles in subsequent guidance that would distinguish roles and responsibilities of boards of directors and management, incorporate the feedback received on the draft principles, and consider lessons learned and best practices from the industry and other jurisdictions. FDIC encourages financial institutions to consider climate-related financial risks in a manner that allows them to continue to prudently meet the financial services needs of their communities. This request for comment from FDIC is substantively similar to the one issued by the Office of the Comptroller of the Currency on December 16, 2021.


    Related Links


    Keywords: Americas, US, Banking, Climate Change Risk, ESG, Sustainable Finance, Disclosures, Credit Risk, Liquidity Risk, Operational Risk, Scenario Analysis, Compliance Risk, Reporting, FDIC, Subheadline

    Featured Experts
    Related Articles

    CFPB Finalizes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.

    March 30, 2023 WebPage Regulatory News

    BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023

    The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.

    March 23, 2023 WebPage Regulatory News

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    US Congress Report Examines Data Privacy and Cybersecurity Regulations

    The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    EU to Conduct One-Off Scenario Analysis to Assess Transition Risk

    The European authorities recently made multiple announcements that impact the banking sector.

    March 10, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8810