On December 2, 2022, the Federal Reserve Board invited public comment on proposed principles providing a high-level framework for the safe and sound management of exposures to climate-related financial risks for large banking organizations. According to the FRB, the proposed principles would apply to banking organizations with more than $100 billion in total assets and address both the physical risks and transition risks associated with climate change.
The draft principles are intended to support financial institutions’ efforts to incorporate climate-related financial risks into financial institutions’ risk management frameworks in a manner consistent with safe and sound practices. It would cover six areas: governance; policies, procedures, and limits; strategic planning; risk management; data, risk measurement and reporting; and scenario analysis.
It can be recalled that the OCC solicited papers and research on climate risk while the FDIC issued a similar proposal earlier this year. The FRB intends to work with those agencies to promote consistency in the supervision of large banks through final interagency guidance.
Read the FRB’s announcement here.
The FRB’s proposal can be found here.