CONTACT: Brigid Richelieu
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brichelieu@fsforum.com
The Nation’s Largest Banks Are Taking Steps to Assess and Manage Climate-Related Financial Risks, Urge Principles- and Risk-Based Approach
Washington, D.C. – In response to proposals from the Office of the Comptroller of the Currency (OCC) and the Basel Committee on Banking Supervision (BCBS), the Forum commented on efforts to establish guidance for banking organizations to manage climate-related financial risks and offered specific recommendations on how the proposals could be adjusted to further reflect the proposals’ goals.
“Our members have taken important steps to integrate climate-related financial risk into their governance, strategy, and risk management frameworks,” Forum President and CEO Kevin Fromer said. “Regulators and international standard setters should allow for flexibility and use a principles- and risk-based approach to support banks’ efforts to manage and mitigate climate-related financial risks.”
The Forum’s comments offered several key observations and recommendations. The Forum supports the use of scenario analysis rather than traditional stress testing, which is used to assess banks’ near-term capital adequacy in the face of severe downturns. The Forum also endorsed regulators’ use of high-level, risk-based principles that enable flexibility for banks to incorporate climate-related financial risks into their existing risk-management frameworks. Such an approach is consistent with regulatory expectations that banks’ risk-management frameworks encompass all material risks and allows banks to more expeditiously address emerging climate-related financial risks, the Forum said.
The Forum’s full comments to the Basel Committee can be found here. The Forum’s full comments to the OCC can be found here, and an accompanying factsheet can be found here.
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The Financial Services Forum is an economic policy and advocacy organization whose members are the chief executive officers of the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.
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