OCC Withdraws from Climate Risk Principles, Signaling Shift in Regulatory Approach

Key Takeaways

• OCC Withdrawal: The OCC withdrew from participation in the interagency principles for climate-related financial risk management.
• Existing Risk Management Framework: Acting Comptroller Rodney E. Hood highlighted that the OCC’s existing risk management framework addresses climate-related risks.
• Bank Expectations: The OCC expects banks to maintain risk management processes commensurate with their size, complexity, and risk exposure.
• Regulatory Shift: The OCC’s decision reflects a broader reassessment of climate-related financial oversight.

Deep Dive

The Office of the Comptroller of the Currency (OCC) has announced its withdrawal from the interagency principles for climate-related financial risk management for large financial institutions, signaling a shift in its regulatory approach.

Acting Comptroller of the Currency Rodney E. Hood stated that the principles had become “overly burdensome and duplicative,” adding that the OCC’s existing risk management framework already covers potential exposures to severe weather events and natural disasters. Hood emphasized that the OCC expects all banks to maintain effective risk management processes commensurate with their size, complexity, and risk exposure. The withdrawal, he said, will not compromise the agency’s commitment to maintaining the safety and stability of the federal banking system.

“The OCC’s existing guidance for banks to maintain a sound risk management framework applies to all activities conducted by supervised institutions, including potential exposures to severe weather events or natural disasters,” Hood explained.

This decision by the OCC mirrors a similar move by the U.S. Securities and Exchange Commission (SEC), which recently stepped back from its defense of climate disclosure rules in ongoing litigation. As the landscape of climate-related regulations continues to evolve, the OCC’s retreat underscores the challenges of balancing effective oversight with practical risk management, leaving the future of climate-related regulatory frameworks uncertain.

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