OCC Drafts Climate Risk Management Principles For Large Banks

The OCC issued draft Principles for Climate-Related Financial Risk Management for Large Banks. The draft principles provide banks with "a high-level framework for the safe and sound management of exposures to climate-related financial risks, consistent with the existing risk management framework described in existing OCC rules and guidance."

The draft principles are intended to support efforts by banks to focus on key aspects of climate risk management and "help bank management make progress toward answering key questions on exposures and incorporating climate-related financial risks into banks' risk management frameworks." The OCC asserted that banks are likely to be affected by both the physical risks associated with climate change and the resulting transition risks. The OCC outlined physical risks as risks to people and property from climate events, such as hurricanes, wildfires, floods, heatwaves and the rise in sea level. Transition risks, meanwhile, were