Governance Briefing — U.S. interagency climate risk principles for large banks
The Federal Reserve, OCC, and FDIC expect large banks to embed board-level governance over climate-related financial risks under the 2023 interagency principles, with full alignment targeted in 2024 supervisory reviews.
Executive briefing: The Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation jointly issued Principles for Climate-Related Financial Risk Management for Large Financial Institutions on 24 October 2023 (88 FR 75326). The principles apply to institutions with more than $100 billion in total consolidated assets. Supervisors expect boards and senior management to integrate climate risks into governance, risk management, strategic planning, and scenario analysis frameworks during 2024 examinations.
Key governance signals
- Board oversight mandate. Boards must understand climate risk drivers, set risk appetite, and assign responsibilities for oversight and reporting.
- Senior management accountability. Management should implement policies, procedures, and internal controls to manage climate-related financial risks consistent with board direction.
- Data and reporting expectations. Institutions need reliable data, metrics, and management information systems to monitor exposures and inform decision-making.
Action checklist
- Update board charters and committee structures to incorporate climate oversight, including escalation protocols and reporting cadence.
- Map climate risk assessments to enterprise risk management, credit, market, liquidity, and operational risk frameworks.
- Develop scenario analysis governance covering model validation, assumption management, and cross-functional participation.
Enablement moves
- Establish management committees that coordinate climate risk, finance, legal, and sustainability teams with clear accountability matrices.
- Implement data governance programmes for climate metrics, including data lineage, quality controls, and aggregation standards.
- Prepare supervisory engagement packages demonstrating board training, reporting materials, and remediation of identified gaps.
Sources
- Federal Register — Principles for climate-related financial risk management for large financial institutions
- Federal Reserve press release — Federal agencies issue principles for climate-related financial risk management
Zeph Tech helps U.S. large banks codify climate governance by aligning board reporting, scenario governance, and data management with interagency supervisory expectations.