Agencies finalize climate risk guidance for large banks

The federal banking regulators published interagency principles for climate-related financial risk management for financial institutions with $100 billion or more in total consolidated assets.

Details: The principles:

• Represent final interagency guidance, meaning they do not have the force and effect of law.

• Do not serve as established requirements for financial institutions that can form the basis of an enforcement action.

• While intended for large banks, nevertheless say that “all financial institutions, regardless of size, may have material exposures to climate-related financial risks.”

ICBA Response: In a national news release, ICBA objected to the language describing all financial institutions and said it is troubled by the impact these principles may ultimately have on community banks. “ICBA remains concerned that the true aim of the principles is to choke off legal but disfavored industries from the financial system, and that community banks may also be expected to comply with today’s large bank guidance,” ICBA President and CEO Rebeca Romero Rainey said.

Previous ICBA Advocacy: ICBA previously expressed concerns with the FDIC principles. In a June comment letter and separate letter to the agency with state community banking associations, ICBA said the principles could ultimately trickle down to affect community banks.

ICBA View: ICBA strongly opposes climate risk regulation of community banks and has separately expressed concerns with Securities and Exchange Commission and New York State Department of Financial Services climate proposals, including in an American Banker op-ed earlier this year. ICBA recently told Congress that climate risk regulation is an emerging threat to the business model of community banks and the customers they serve.