US bank regulator to step up climate action

February 14, 2022|Written by David Clarke|Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Federal Reserve

The US Federal Deposit Insurance Corporation (FDIC) has announced a series of measures aimed at addressing climate-related financial risks to banks. These include developing new guidance and setting up an interdivisional working group.

The move heralds a significant change in direction for the agency after it came under new leadership earlier this month. The previous chair, Jelena McWilliams was the only top regulator who declined to support the Financial Stability Oversight Council’s landmark climate risk report. McWilliams resigned last week after a dispute with the FDIC’s board, in which climate was said to be a factor.

Acting chair Martin Gruenberg said that climate risks would be a key priority for the FDIC in 2022. He also revealed the agency will join the international Network for Greening the Financial System.

The FDIC is the primary regulator for nearly 4,000 banks and savings associations, a group mostly composed of small and medium-sized institutions. Banks fall under FDIC supervision if they are chartered by states and have opted not to join the Federal Reserve system.

The Fed and the Office of the Comptroller of the Currency (OCC), which are together responsible for supervising larger institutions, have both already announced their intention to issue climate risk guidance. The OCC is currently seeking feedback on draft principles on climate risk, and chair Jerome Powell has said the Fed will follow suit in due course. With the FDIC joining their ranks, there may now be scope for greater inter-agency cooperation.

Sustainable economy thinktank Ceres has called for the FDIC to take further steps, such as including climate considerations in its next risk review. The risk review is an exercise undertaken to identify risks to the banks under the FDIC’s supervision, or to the $120bn deposit insurance fund it oversees.

In a memo published this month, Ceres also recommended that US financial regulatory agencies work together to conduct a policy “sprint” on climate risks – a short, timebound initiative to review climate risks to financial institutions and to evaluate regulatory and policy gaps in supervision.

This page was last updated February 15, 2022

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