IIF Authors

Status: Will be live at 02/14/2022 15:06

IIF responds to OCC Consultation on Principles for Climate-Related Financial Risk Management for Large Banks


The IIF submitted a comment letter to the Office of the Comptroller of the Currency (OCC) consultation on ‘Principles for Climate-Related Financial Risk Management for Large Banks.’

In the letter, which builds on the IIF response letter to the concurrent Basel Committee on Banking Supervision (BCBS) consultation on ‘Principles for the effective management and supervision of climate-related financial risks,’ the IIF appreciates the OCC’s initiative to articulate a high-level framework for the safe and sound management of exposures to climate-related financial risks, and its principles-based approach to this important topic.

It is encouraging that many authorities across the world are seeking to move swiftly on these extremely important and pressing topics; however, an uncoordinated and rapid proliferation of new policies could create a fragmented, and potentially less effective, policy landscape. As the OCC is a BCBS member and recognizing the similarities of approach between the BCBS and OCC draft principles, the IIF appreciates the steps the OCC has taken to contribute to greater international coordination of supervisory approaches. It would also be beneficial for the OCC to work with its domestic counterparts at the other relevant U.S. federal banking agencies to develop a streamlined, data-driven, and coherent approach to the prudential regulation and supervision of climate-related financial risks in the United States.

IIF members agree with the OCC’s assessment that climate-related scenario analysis exercises differ from traditional stress testing exercises, and have asked the BCBS to consider making this distinction clearer in their respective principles. IIF members also believe that it would not be appropriate at this stage to quantitatively incorporate climate-related risks into capital or liquidity adequacy assessments since the foundations are not in place with respect to technical knowledge, conceptual foundations, data, and modelling. The IIF, therefore, appreciates the generally cautious approach the OCC appears to be taking on these topics in the draft principles.