WASHINGTON — The Office of the Comptroller of the Currency plans to publish “high-level” supervisory expectations for how large banks manage climate risk by the end of 2021, the agency’s acting chief said Wednesday.
The OCC's announcement was one of several climate-related initiatives outlined as officials from around the world met in Glasgow, Scotland, to discuss steps to mitigate the impact of a warming planet on the financial system.
"I have prioritized the need to incorporate climate change into risk management frameworks to address the safety and soundness of the federal banking system," said acting Comptroller of the Currency Michael Hsu.
"The OCC is working to take a leadership role to understand these significant and complex challenges. We plan to develop high-level climate risk management supervisory expectations for large banks and hope to issue framework guidance for comment by the end of the year."
Hsu's statement came on what global policymakers have referred to as COP26 Finance Day, part of the intensive round of talks among world leaders meeting at the 26th UN Climate Change Conference of the Parties in Glasgow.
Corresponding with the summit, the Network for Greening the Financial System unveiled a new set of commitments called the Glasgow Declaration. The document outlined priorities for member central banks and supervisors, including the development of enhanced climate scenario testing and better, more ubiquitous climate data for financial institutions.
The OCC, Federal Reserve and New York State Department of Financial Services are all members of the NGFS.
"As a member of NGFS and through our own initiatives, we will continue to accelerate our response to the potential safety and soundness impacts of climate risk, consistent with the goals of the Paris Agreement and U.N. Framework Convention on Climate Change," Hsu said.
The Fed said in a statement that while addressing climate change is the responsibility of elected leaders, the central bank "is committed to working within our existing mandates and authorities to address the implications of climate change, particularly the regulation and supervision of financial institutions and the stability of the broader financial system."
The OCC and Fed's statements came on the same day the New York regulator announced the establishment of a new Climate Risk Division and the appointment of Yue (Nina) Chen to lead it.
The NGFS called on members of the international group to "step up" on efforts to assist financial authorities "from emerging and developing economies" and improve the ability of those regulators to respond to climate change.
The action plan also called for a deeper exploration of emerging issues in climate policy “such as the impact of the loss of biodiversity or the risks associated with climate-related litigation,” according to the action plan’s text.
Hsu's remarks build on an earlier statement he made last month after the Financial Stability Oversight Council published a
Since coming into office in May, Hsu has quickly mobilized the national bank regulator to give closer scrutiny to the risks that climate change may pose to banks and the broader financial system. In addition to joining NGFS last summer, the OCC also hired its
