On March 30, 2022, the Federal Deposit Insurance Corporation (“FDIC”) released a proposed policy statement related to sound management of exposures to climate-related financial risks (the “Proposal”). The Proposal is targeted at FDIC-supervised financial institutions with more than $100 billion in total consolidated assets (“covered banks”) and is intended to provide a high-level framework for the safe and sound management of climate-related financial risks by covered banks and serve as the basis for more detailed guidance the FDIC expects to issue in the future.
The Proposal includes both a general set of principles for the management of climate-related financial risks and brief descriptions of how those risks can be assessed in various risk categories. In these substantive respects, the Proposal effectively mirrors a similar proposal issued by the Office of the Comptroller of the Currency in December 2021 on a nearly verbatim basis. (See Covington’s prior client alert on that OCC proposal here for a discussion of the substance of that proposal, which applies equally to the FDIC’s more recent Proposal.) However, the preamble discussion that accompanies the Proposal does include several statements not contained in the December 2021 OCC proposal, most notable of which are statements that “the manner in which financial institutions manage climate-related financial risks to address safety and soundness concerns should also seek to reduce or mitigate the impact that management of these risks may have on broader aspects of the economy, including the disproportionate impact of risk on LMI and other disadvantaged communities” and that “[t]hrough this and any subsequent climate-related financial risk guidance, the FDIC will continue to encourage institutions to prudently meet the financial services needs of their communities.”
Like the OCC’s December 2021 proposal, the Proposal both requests public comment in general and poses a range of specific questions for commenters to consider. These questions largely mirror those posed in the OCC proposal, but also include an additional question asking whether the FDIC or other agencies should “modify existing regulations and guidance, such as those associated with the Community Reinvestment Act, to address the impact climate-related financial risks may have on LMI and other disadvantaged communities.”
Comments are due sixty days after the Proposal is published in the Federal Register, which is likely to occur in the next several weeks.