ICBA raises concerns with Basel climate risk paper

ICBA expressed concerns with a Basel Committee on Banking Supervision document on bank management and supervisory oversight of climate risk.

Background: The Basel paper outlines various principles that bank managers should adhere to when thinking about managing climate risk in their institutions, including loan origination due diligence frameworks, sufficient liquidity and capital, and comprehensive risk management.

ICBA Letter: In response, ICBA:

• Called on the committee to recognize the difference between community banks and the largest global financial institutions.

• Stressed that climate change modeling would be costly and difficult to implement with questionable benefits.

• Said community banks already consider climate disasters when they underwrite loans.

OCC Response: The Basel response came a day after ICBA applauded the OCC for tailoring its proposed climate-related financial risk management principles to banks over $100 billion in assets, though the association expressed concerns that examiners could eventually apply the framework to community banks.