The federal banking agencies announced the withdrawal of interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions.
Background: The October 2023 principles were intended for financial institutions with more than $100 billion in assets, though ICBA expressed concern with their potential impact on community banks given language in the principles describing all financial institutions. The OCC withdrew its participation in the principles earlier this year.
Statement: In withdrawing the principles, the agencies said:
They do not believe principles for managing climate-related financial risk are necessary because the existing safety and soundness standards require all supervised institutions to have effective risk management commensurate with their size, complexity, and activities.
All supervised institutions are expected to consider and appropriately address all material financial risks and should be resilient to a range of risks, including emerging risks.
ICBA Advocacy: In a national news release after regulators issued the guidance in 2023, ICBA said it is troubled by the impact these principles may ultimately have on community banks. In previous letters to regulators, ICBA said the principles could ultimately trickle down to affect community banks.
SEC Announcement: The SEC also announced earlier this year that it is ending the defense of its rule requiring public companies to issue climate-related disclosures. ICBA commended the SEC, citing the rule’s unprecedented costs and potential liabilities.
ICBA View: ICBA opposes any climate risk regulation that adversely impacts community banks. In a statement to Congress last year, ICBA said agency efforts on climate risk are an emerging threat to community banks and their customers.