Framework guidance for dealing with climate change risk management “supervisory expectations” will be released this year, the acting head of the regulator of national banks said Monday, following a “range of practices” review that will begin this week.
In a speech at agency headquarters in Washington, Acting Comptroller of the Currency Michael J. Hsu said the Office of the Comptroller of the Currency (OCC) is now developing high-level supervisory expectations for large banks related to climate risk management.
“We expect to issue framework guidance by the end of this year, to be followed next year with detailed guidance for each risk area,” Hsu said. “The detailed guidance will build on a range-of-practices review that will launch this week, industry and climate groups’ input, and lessons from other jurisdictions.”
Hsu said that bank boards can play a “pivotal role” in putting into motion the “concrete steps that banks need to take to prudently manage climate risk.” He outlined five “pointed questions” for boards of large banks to pose to management about their exposures to climate-change risks. Those are:
- What is the bank’s overall exposure to climate change?
- Which counterparties, sectors, or locales warrant the bank’s heightened attention and focus?
- How exposed is the bank to a carbon tax?
- How vulnerable are the bank’s data centers and other critical services to extreme weather?
- What can the bank do to position itself to seize opportunities from climate change?
The acting comptroller asserted that climate change poses significant risks to the financial system and that the industry is at an important moment. “Today, I want to move the climate conversation from the offices of scientists, policymakers, and regulators to bank boardrooms,” he said.