FDIC seeks comments on climate-change proposals

The Federal Deposit Insurance Corp. is seeking public comments after releasing proposed steps big banks should consider to manage exposure to climate-related financial risks. 

The federal agency said in a press release Wednesday that it the principles are focused on banks with more than $100 billion of assets. 

"The proposed statement of principles represents an initial step toward the promotion of a consistent understanding of the effective management of climate-related financial risks," Martin Gruenberg, the FDIC's interim chairman, said in a press release.

"The FDIC plans to elaborate on each of these principles in subsequent guidance," Gruenberg added. "Future guidance will continue to be appropriately tailored to reflect differences in financial institutions’ circumstances, including size, complexity of operations and business model."

While the proposal would apply to the nation's biggest banks, Gruenberg said in the release that "all financial institutions, regardless of size, complexity or business model, are subject to climate-related financial risks."

Regarding governance, the FDIC's principles said a bank's board and management "should demonstrate an appropriate understanding of climate-related financial risk exposures." 

Appropriate steps should include reviewing data necessary for oversight, allocating appropriate resources, assigning climate-related financial risk responsibilities throughout the bank and "clearly communicating to staff regarding climate-related impacts to the institution’s risk profile."

The agency said management teams should incorporate climate-related risks into their institution's policies, procedures and limits. Those risks should also be incorporated into a bank's overall business strategy and risk appetite, along with its financial, capital and operations plans.

The FDIC also noted that climate-related scenario analysis has become "an important approach for identifying, measuring and managing climate-related risks."

“The draft principles were developed to support efforts under way by large financial institutions to consider key aspects of climate-related financial risk management,” the release said. 

Credit risk and liquidity risk should also be considered, the FDIC said in its proposal.

The FDIC said it 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.”

The agency noted that its request for comment is “substantively similar” to the one issued by the Office of the Comptroller of the Currency on Dec. 16.

The FDIC said that comments will be due within 60 days of the notice is published in the National Register.

The proposal comes at a time when climate activists have sought votes at several large banks' annual meetings to push for more-aggressive steps to eliminate the financing of fossil-fuel projects.