Climate Related Risk Management Principles Released by US FDIC

On March 30, 2022, the US Federal Deposit Insurance Corporation (“FDIC”) released draft principles for managing exposures to climate-related financial risks (“Climate Principles”).¹ The Climate Principles generally are targeted at banks with over $100 billion in total assets that are regulated by the FDIC.²

Except for the minor points discussed below, the Climate Principles are effectively identical to principles that were proposed by the Office of the Comptroller of the Currency (“OCC”) in December 2021. (Please see our earlier Legal Update for a discussion of the substance of the OCC’s principles.)

The only difference between the FDIC’s Climate Principles and the OCC’s principles is that the FDIC included a more detailed preamble discussion of the ways in which climate change may create climate-related financial risks and have a negative effect on the financial stability of the United States. This may have been intended to address concerns that the US banking regulators are not climate regulators and do not have a mandate to help the United States meet carbon reduction goals.

Also, the FDIC included additional questions asking if (i) regulations or guidelines prescribing particular risk management practices would be helpful to financial institutions as they adjust to doing business in a changing climate and (ii) the federal banking regulators should modify existing regulations and guidance, such as those associated with the Community Reinvestment Act, to address the impact that climate-related financial risks may have on low- and moderate-income individuals and members of other disadvantaged communities.

The FDIC will accept comments on the Climate Principles for 60 days following publication in the Federal Register and expects to issue more detailed guidance on climate risk management throughout 2022.

¹ FDIC, FIL-13-2022 (Mar. 30, 2022), https://www.fdic.gov/news/financial-institution-letters/2022/fil22013.html.

² The FDIC regulates state nonmember banks, state-licensed insured branches of foreign banks, and state savings associations.