U.S. banking regulators are scrapping guidance that aimed to help large banks identify climate-related financial risks.
Back in 2023, the U.S. bank regulators — the U.S. Federal Reserve Board, the Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency — adopted principles designed to address weaknesses in how banks deal with the risks posed by climate change, both physical and transition risks, that could impact their soundness.
Now, in a joint release, the regulators announced that they are retracting the guidance, which applied to banks with over US$100 billion in assets.
The regulators said that they no longer believe that climate-specific guidance is needed because the existing rules already require banks to address all material financial risks — and, regulations devoted to climate risks could “distract from the management of other potential risks” that are addressed by their general risk management processes.
“The agencies do not believe principles for managing climate-related financial risk are necessary because the agencies’ existing safety and soundness standards require all supervised institutions to have effective risk management commensurate with their size, complexity and activities,” the regulators said in the release.
Additionally, under the existing rules, banks are expected to address all material financial risks, and to be resilient to a range of risks, they noted.
The climate-focused guidance was retracted, effective immediately.
The step back from focusing on climate risks by bank regulators follows a decision earlier this year by the U.S. Securities and Exchange Commission (SEC) to abandon its efforts to expand climate disclosure requirements — moves that echo the new U.S. administration’s rejection of efforts to combat climate change.