The Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency have jointly withdrawn a key set of climate risk guidelines intended for large U.S. banks. Originally introduced in 2023, the “Principles for Climate-Related Financial Risk Management” aimed to help banks with over $100 billion in assets integrate climate-related risks into their risk management frameworks.

The decision to rescind the guidelines reflects a shift in regulatory strategy. The agencies stated that existing safety and soundness regulations already require banks to manage all material risks, including those related to climate. As such, they argued that separate, climate-specific principles are unnecessary and may even distract from broader risk oversight responsibilities.

This reversal signals a departure from the growing global trend of embedding climate risk into financial regulation. In Europe and parts of Asia, regulators continue to strengthen disclosure and risk management expectations around climate change. The U.S. decision, by contrast, suggests a preference for incorporating climate risk under the umbrella of general financial risk oversight rather than creating a standalone regulatory framework.

Notably, Federal Reserve Vice Chair for Supervision Michael S. Barr dissented from the decision, stating that revoking the climate principles “defies logic and sound risk-management practices.” He criticized the agencies for failing to present evidence supporting the withdrawal and warned that climate-related financial risks are rising, not diminishing.

The move introduces regulatory uncertainty for major financial institutions that have already begun aligning with global standards such as those from the ISSB or the TCFD. Many banks have been proactively developing climate-related governance and disclosure structures, and the lack of dedicated U.S. guidance may create inconsistencies in global compliance and investor expectations.

Overall, the withdrawal of climate-specific risk rules by U.S. regulators represents a significant policy shift. It underscores a broader tension between aligning with international sustainability practices and adhering to a more generalized approach to risk management within the U.S. banking system.

Source:

https://esgnews.com/federal-reserve-fdic-withdraw-climate-risk-rules-for-large-banks/