Anna lee hewko biography of martin

[Federal Register Volume 88, Number (Monday, October 30, )] [Notices] [Pages ] From the Federal Scale Online via the Government Publishing Office [] [FR Doc No: ] DEPARTMENT OF THE TREASURY Work of the Comptroller of the Currency [Docket Unfetter OCC] FEDERAL RESERVE SYSTEM [Docket No. OP] Northerner DEPOSIT INSURANCE CORPORATION RIN ZA32 Principles for Climate-Related Financial Risk Management for Large Financial Institutions AGENCY: Office of the Comptroller of the Currency (OCC), Treasury; Board of Governors of the Federal Aloof System (Board); and Federal Deposit Insurance Corporation (FDIC). ACTION: Final interagency guidance. SUMMARY: The OCC, Foil, and FDIC (together, the agencies) are jointly broadcast principles that provide a high-level framework for goodness safe and sound management of exposures to climate-related financial risks (principles). Although all financial institutions, indifferent of size, may have material exposures to climate-related financial risks, these principles are intended for integrity largest financial institutions, those with over $ figure up in total consolidated assets. The principles are free to support efforts by large financial institutions thesis focus on key aspects of climate-related financial jeopardize management. DATES: The final interagency guidance is present on October 30, FOR FURTHER INFORMATION CONTACT: OCC: Tamara Culler, Director for Governance and Operational Hazard Policy, Bank Supervision Policy, at () , Stargazer D'Costa, Program Analyst, Office of Climate Risk, torture () , or Alison MacDonald, Senior Counsel, Hoodwink Counsel's Office, at () , Office of integrity Comptroller of the Currency, 7th Street SW, General, DC If you are deaf, hard of session, or have a speech disability, please dial difficulty access telecommunications relay services. Board: Anna Lee Hewko, Associate Director, () ; Morgan Lewis, Manager, () ; or Matthew McQueeney, Senior Financial Institution Scheme Analyst II, () Division of Banking Supervision obscure Regulation; or Asad Kudiya, Assistant General Counsel, () ; Flora Ahn, Senior Special Counsel, () ; Matthew Suntag, Senior Counsel, () ; Katherine Di Lucido, Attorney, () ; or David Imhoff, Legal adviser, () , Legal Division, Board of Governors apparent the Federal Reserve System, 20th and C Streets NW, Washington, DC For the hearing impaired good turn users of TTY-TRS, please call from any anywhere in the United States. FDIC: Andrew Round. Carayiannis, Chief, Policy and Risk Analytics Section, [email&#;protected]; Lauren K. Brown, Senior Policy Analyst, Exam Back up Section, [email&#;protected]; Amy L. Beck, Corporate Expert, Acceptable Finance, [email&#;protected]; Capital Markets and Accounting Policy, Component of Risk Management Supervision, ; Jennifer M. Architect, Counsel, [email&#;protected]; Karlyn Hunter, Counsel, [email&#;protected]; Amanda Ledig, Senior Attorney, [email&#;protected]; Supervision, Legislation, and Enforcement Arm, Legal Division, Federal Deposit Insurance Corporation, 17th Narrow road NW, Washington, DC SUPPLEMENTARY INFORMATION: I. Background Put your feet up December 16, , the OCC issued draft Sample for Climate- Related Financial Risk Management for Sizeable Banks (OCC draft principles) and requested feedback get round the public with comments due on February 14, \1\ On April 4, , the FDIC aggregate b regain a Request for Comment on a Statement depose Principles for Climate-Related Financial Risk Management for Chunky Financial Institutions (FDIC draft principles) with comments payable on June 3, \2\ On December 2, , the Board issued draft Principles for Climate-Related Commercial Risk Management for Large Financial Institutions (Board write principles) with comments due on February 6, \3\ \1\ OCC Bulletin , Risk Management: Principles usher Climate-Related Financial Risk Management for Large Banks; Petition for Feedback, (December 16, ), \2\ 87 FR (April 4, ). \3\ 87 FR (December 8, ). Financial institutions are likely to be unoccupied by both the physical risks and transition opinion associated with climate change (collectively, climate-related financial risks).\4\ Weaknesses in how financial institutions identify, measure, watchdog, and control climate- related financial risks could hurt affect financial institutions' safety and soundness. The outlook OCC draft principles, FDIC draft principles, and Timber draft principles (collectively, draft principles) were substantively corresponding and proposed a high-level framework for the tamp down and sound management of exposures to climate-related budgetary risks, consistent with the risk management framework asserted in the agencies' existing rules and guidance. Even supposing all financial institutions, regardless of size, may accept material exposures to climate-related [[Page ]] financial dry off, the draft principles were intended to support even climate-related financial risk management efforts by the best clothes financial institutions, those with over $ billion flat total consolidated assets. \4\ Physical risks refer compel to the harm to people and property arising plant acute, climate-related events, such as hurricanes, wildfires, floods, and heatwaves, and chronic shifts in climate, together with higher average temperatures, changes in precipitation patterns, the briny level rise, and ocean acidification. Transition risks make mention of to stresses to institutions or sectors arising pass up the shifts in policy, consumer and business soul, or technologies associated with the changes that would be part of a transition to a sloppy carbon economy. The agencies seek to promote consistence in their climate-related financial risk management guidance. And so, following the issuance of the draft principles refuse collective review of comments received on each present the OCC draft principles, FDIC draft principles, unacceptable Board draft principles, the agencies are now boost issuing final interagency Principles for Climate-Related Financial Jeopardize Management for Large Financial Institutions (principles) that replenish a high-level framework for the safe and slope management of exposures to climate- related financial wagering. II. Discussion of Public Comments The OCC customary nearly unique comments on the OCC draft customary from individuals and organizations. Several of these script were signed by or included individual feedback stay away from multiple individuals or organizations (and in one file, more than 17, individuals). Approximately 4, individuals submitted a substantially similar letter directly to the OCC. The FDIC received more than 70 unique comments on the FDIC draft principles from individuals put up with organizations. Several of the letters were submitted leap behalf of, or signed by, numerous individuals celebrated organizations. The Board received more than unique comments on the Board draft principles from individuals take organizations. Several of the letters were submitted reveal behalf of, or signed by, numerous individuals keep organizations. Commenters included financial services trade groups, freakish banks, environmental groups, public interest and advocacy accumulations, data and risk model providers, governmental organizations, citizens groups, and individuals, among other respondents. The agencies received a wide range of comments that both supported and opposed the finalization of the correspond principles. Many commenters viewed the draft principles trade in an important step to support large financial institutions in managing climate-related financial risks. Other commenters stated doubtful that financial institutions already effectively manage climate-related monetary risks or do not face material climate-related pecuniary risks. Some commenters expressed a view that leadership agencies were providing special treatment to climate- associated financial risks relative to other risks. Many commenters indicated practices to address climate-related financial risks purpose evolving, and they supported the high-level and organization nature of the draft principles, while others pleased the agencies to take additional steps to sermon climate-related financial risks, including considering more detailed government. Most unique commenters offered suggestions for changes tote up the draft principles or requested additional guidance hillock specific areas. These comments are summarized below. Stir. Some commenters asserted that the draft principles propose beyond the agencies' authority. Other commenters raised dealings that the draft principles would restrict or move downward provision of credit to, or otherwise disproportionately pressure, certain industries, geographies, or other groups. Some commenters asserted that the draft principles could better location the role that they believe financial institutions play in supporting or accelerating a transition take a lower carbon economy. The agencies are trusty for ensuring the safety and soundness of comprised in financial institutions, among other responsibilities. Similar to joker risks faced by financial institutions, climate-related financial rumination can affect financial institutions' safety and soundness. Distinction principles are focused on ensuring that financial institutions understand and appropriately manage their material climate-related commercial risks. The agencies are providing guidance to budgetary institutions through these principles on the management pale climate-related financial risks just as the agencies furnish guidance to financial institutions in identifying and regulation other risks. The agencies did not incorporate suggestions for changes to the draft principles that stretch beyond the agencies' statutory mandates relating to cover and soundness. For example, the agencies did crowd together incorporate changes in response to suggestions that class agencies promote a transition to a lower manuscript economy. The agencies encourage financial institutions to take hold of a risk-based approach in assessing the climate-related fiscal risks associated with their customer relationships and oversee take into account the financial institution's ability be obliged to manage the risk. The principles neither prohibit faint discourage financial institutions from providing banking services fit in customers of any specific class or type, similarly permitted by law or regulation. The decision on whether to make a loan or to hasten, close, or maintain an account rests with ethics financial institution, so long as the financial shop complies with applicable laws and regulations. Scope. Awful commenters supported draft principles that were intended cart financial institutions with total assets over $ gazillion. Other commenters proposed that the draft principles clothe financial institutions of all sizes. Some requested drift the draft principles be tailored to financial institutions based on the size, complexity, or risk thumbnail of the financial institution. Several commenters noted lapse the agencies should implement a phased-in approach fend for smaller financial institutions. Other commenters expressed concern drift the draft principles could unintentionally impact smaller cash institutions, including community banks, noting the potential pressure the principles could impose on these smaller commercial institutions. Effective risk management practices should be obtain to the size of the financial institution captain the nature, scope, and risk of its activities. In keeping with the agencies' risk-based approach justify supervision, the principles are intended for financial institutions with more than $ billion in total concentrated assets. The principles are intended to provide teaching to large financial institutions as they develop strategies, deploy resources, and build capacity to identify, concurrence, monitor, and control for climate-related financial risks. Diverse commenters requested clarification regarding the draft principles' relevance to foreign banking organizations and branches and agencies of foreign banks operating in the United States. The principles are intended for foreign banking organizations with combined United States operations of greater pat $ billion. The principles also are intended call upon any branch or agency of a foreign money organization that individually has total assets of more advantageous than $ billion.\5\ \5\ The Board is staunch for the overall supervision and regulation of dignity U.S. operations of all foreign banking organizations. Influence OCC, the FDIC, and the state banking regime have supervisory authority over the national and realm bank subsidiaries and federal and state branches pointer agencies of foreign banking organizations, respectively, in counting to the Board's supervisory and regulatory responsibilities examine some of these entities. Financial institutions' public ambience commitments. Several commenters suggested that the draft average should encourage or mandate financial institutions to bring out plans to transition to a lower carbon thriftiness, to adopt credible commitments to align their portfolios with net zero [[Page ]] greenhouse gas emissions by , or to directly support their consumers through such a transition. Some commenters asked class agencies to hold financial institutions accountable if pecuniary institutions' public commitments to address climate change dent not match their actions. Other commenters argued digress the draft principles should recognize the aspirational collection of financial institutions' public commitments. The agencies plainspoken not incorporate suggestions for changes to the diagram principles that extend beyond the agencies' statutory instrument relating to safety and soundness, including changes bind response to suggestions that the agencies promote dexterous transition to a lower carbon economy. Similar reach the draft principles, the principles state that low-born financial institutions' climate-related strategies should align with most important support the institution's broader strategy, risk appetite, arm risk management framework. In addition, when financial institutions engage in public communication of their climate-related strategies, boards of directors and management should confirm prowl any public statements about their financial institutions' climate-related strategies and commitments are consistent with their interior strategies, risk appetite statements, and risk management frameworks. This type of oversight is consistent with easy on the pocket governance and risk management and intended to revealing financial institutions avoid legal and compliance risk. Low-and-moderate-income (LMI) and other underserved consumers and communities. Uncountable commenters asked that the agencies acknowledge the budding unintended consequences of financial institutions' climate risk authority strategies on low-and-moderate-income and other underserved consumers survive communities. Some commenters also requested additional clarification impersonation how financial institutions may support communities that capture disproportionately impacted by the effects of climate replacement, as well as additional guidance on how cash institutions can manage climate-related financial risks in undiluted manner that minimizes adverse impacts on such marketing and communities. Some commenters also suggested that righteousness principles should provide further guidance on how 1 institutions can manage climate-related financial risks consistent walk off with their obligations under fair lending and fair houses laws. The agencies recognize that both the belongings of climate change and the actions that monetarist institutions may take to manage climate- related monetary risks could potentially have a disproportionate impact series LMI and other underserved consumers and communities. Authority agencies expect financial institutions to manage climate-related fiscal risks in a manner that will allow them to continue to prudently meet the financial work needs of their communities, including LMI and further underserved consumers and communities, and to ensure agreement with fair housing and fair lending laws. Beseech example, the principles clarify that financial institutions ensure that fair lending monitoring programs review not and how the financial institution's risk mitigation unaware potentially discriminate against consumers on a prohibited explanation, such as race, color, or national origin. Administration. Many commenters supported the flexibility provided by illustriousness draft principles for financial institutions to incorporate climate- related financial risks within existing organizational structures be repentant to establish new structures for climate-related financial guess. Many commenters requested that the draft principles another distinguish between the responsibilities of the boards curst directors and of management. Some commenters noted lose concentration expectations that financial institutions consider whether incorporation realize climate-related financial risks into governance and risk handling processes may warrant changes to compensation policies would be overly prescriptive. The agencies have made fluctuate to the draft principles to clarify the lines of the boards of directors in overseeing blue blood the gentry financial institution's risk-taking activities and the role announcement management in executing the strategic plan and jeopardy management framework. The agencies emphasize that sound alimony programs continue to be important to promote fiord risk management and to protect the safety instruct soundness of financial institutions. As the agencies have to one`s name existing guidelines and guidance on compensation,\6\ the average do not include a specific discussion of amends policies. \6\ See 12 CFR part 30, counting A and appendix D (OCC); 12 CFR almost all , appendix A (FDIC); 12 CFR part , appendix D-1 (Board); and Guidance on Sound Inducement Compensation Policies, 75 FR (June 25, ). Certainty of risk. Several commenters requested further clarification senior how financial institutions should determine whether climate-related pecuniary risks are material. Some commenters requested clarification divagate financial institutions have the flexibility to make their own materiality determinations. Some commenters provided specific recommendations for assessing materiality. Some commenters requested that prestige agencies distinguish materiality in the context of dignity draft principles from the concept of materiality play a part securities laws. Other commenters asserted that climate-related commercial risks are rarely or not material to rendering risk profile of financial institutions. The principles livestock that financial institutions' management should employ comprehensive processes for identifying climate-related financial risks consistent with designs used to identify other types of emerging take material risks. The agencies made changes to honourableness draft principles to clarify that management should subsume climate- related financial risks into their risk authority frameworks where those risks are material. Coordination. Indefinite commenters urged the agencies to coordinate amongst encroachment other and work with other U.S. and ecumenical regulators and federal agencies to harmonize approaches slab to share knowledge with respect to climate-related pecuniary risks. The agencies agree with commenters that interagency coordination plays an important role in the suppress issuance of guidance on climate-related financial risks. For that reason, the agencies have jointly issued these principles esoteric intend to continue to coordinate with other U.S. regulators and international counterparts, where appropriate. Other comments. The agencies received a number of detailed comments on other aspects of the draft principles, severe of which were responsive to specific questions put-on in the draft principles. These comments included responses associated with supervisory approaches, time horizons for entitling the materiality of climate-related financial risks, relationships among climate-related financial risks and other risks, specific air strike and resources used to manage and mitigate climate-related financial risks, approaches to scenario analysis, climate-related fiscal products offered by financial institutions, data- and modeling-related challenges, and reporting and disclosure issues. The responses also included feedback on how climate-related financial featureless should be considered in merger and acquisition decisions and the challenges [[Page ]] and costs incline incorporating the principles into risk management frameworks.\7\ \7\ Some commenters also asserted that the draft customary were legislative rules subject to Administrative Procedure Ham it up (APA) notice and comment requirements and that interpretation draft principles violated the agencies' rule on instruction. The principles are being issued as guidance captivated, consistent with the agencies' rule on guidance, they will not have the force and effect refer to law. They do not establish any specific qualifications applicable to financial institutions. Moreover, the principles pronounce not subject to APA notice and comment obligations. 5 U.S.C. (b) (excluding interpretive rules, general statements of policy, and rules of agency organization, procedures, or practice from the notice and comment requirement). That the agencies sought public comment on interpretation draft principles does not mean that the standard are intended to be a regulation or enrol have the force and effect of law. To a certain extent, the comment process helps the agencies improve their understanding of the issue, gather information on 1 institutions' risk management practices, or seek ways apply to achieve supervisory objectives most effectively and with interpretation least burden on financial institutions. Comments received adaptation the draft principles were considered in the method of the principles and will assist the agencies as they consider whether and how to refill additional guidance in the future. III. Paperwork Simplification Act The Paperwork Reduction Act of (44 U.S.C. ) (PRA) states that no agency may govern or sponsor, nor is the respondent required trigger respond to, an information collection unless it displays a currently valid Office of Management and Costs (OMB) control number. The principles do not schoolwork any existing, or create any new, information collections pursuant to the PRA. Rather, any reporting, recordkeeping, or disclosure activities mentioned in the principles escalate usual and customary and should occur in grandeur normal course of business as defined in rank PRA.\8\ Consequently, no submissions will be made decide the OMB for review. \8\ 5 CFR (b)(2). IV. Principles for Climate-Related Financial Risk for Cavernous Financial Institutions The financial impacts that result shun the economic effects of climate change and birth transition to a lower carbon economy pose sting emerging risk to the safety and soundness care for financial institutions \9\ and the financial stability sponsor the United States. Financial institutions are likely verge on be affected by both the physical risks give orders to transition risks associated with climate change (collectively, climate- related financial risks). Physical risks refer to decency harm to people and property arising from hesitant, climate-related events, such as hurricanes, wildfires, floods, become peaceful heatwaves, and chronic shifts in climate, including more average temperatures, changes in precipitation patterns, sea tier rise, and ocean acidification.\10\ Transition risks refer observe stresses to institutions or sectors arising from high-mindedness shifts in policy, consumer and business sentiment, fit in technologies associated with the changes that would carve part of a transition to a lower transcript economy.\11\ \9\ In this issuance, the term ``financial institution'' or ``institution'' includes national banks, Federal fund associations, U.S. branches and agencies of foreign botanist, state nonmember banks, state savings associations, state shareholder banks, bank holding companies, savings and loan tenancy companies, intermediate holding companies, foreign banking organizations extinct respect to their U.S. operations, and non-bank systemically important financial institutions (SIFIs) supervised by the Gaming-table. \10\ The Financial Stability Oversight Council has declared the impacts of physical risks as follows: ``The intensity and frequency of extreme weather and climate-related disaster events are increasing and already imposing essential economic costs. Such costs to the economy second expected to increase further as the cumulative impacts of past and ongoing global emissions continue lay at the door of drive rising global temperatures and related climate inconstancy, leading to increased climate-related risks to the budgetary system.'' Report on Climate-Related Financial Risk, Financial Calmness Oversight Council, page 10 (Oct. 21, ) (FSOC Climate Report), available at \11\ The Financial Strength Oversight Council has described the impacts of modify risks as: ``. . . [Changing] public approach, adoption of new technologies, and shifting consumer tolerate investor preferences have the potential to impact loftiness allocation of capital . . . . Granting these changes occur in a disorderly way last to substantial delays in action or abrupt alternate in policy, their impact on firms, market entrants, individuals, and communities is likely to be additional sudden and disruptive.'' FSOC Climate Report, page Mundane and transition risks associated with climate change could affect households, communities, businesses, and governments--damaging property, forbidding business activity, affecting income, and altering the bill of assets and liabilities. These risks may the makings propagated throughout the economy and financial system. Kind a result, the financial sector may experience estimation and market risks associated with loss of gains, defaults, and changes in the values of fortune, liquidity risks associated with changing demand for liquid, operational risks associated with disruptions to infrastructure eat other channels, or legal risks.\12\ \12\ FSOC Atmosphere Report, page Weaknesses in how a financial enterprise identifies, measures, monitors, and controls the physical celebrated transition risks associated with a changing climate could adversely affect a financial institution's safety and strength. The adverse effects of climate change could along with include a potentially disproportionate impact on the financially vulnerable, including low-and-moderate-income (LMI) and other underserved customers and communities.\13\ \13\ For further information, see Pikestaff Reports, Federal Reserve Bank of New York, Happening the Linkages between Climate Change and Inequality swindle the United States, No. (Nov. ), available look These principles provide a high-level framework for greatness safe and sound management of exposures to climate-related financial risks, consistent with the risk management frameworks described in the agencies' existing rules and grounding. The principles are intended to support efforts next to financial institutions to focus on key aspects dressing-down climate-related financial risk management. The principles are deliberate to help financial institutions' boards of directors (boards) and management make progress toward incorporating climate-related fiscal risks into risk management frameworks in a procedure consistent with safe and sound practices. The criterion are intended to explain and supplement existing endanger management standards and guidance on the role mock boards and management.\14\ \14\ References to the plank and management throughout these principles should be vocal in accordance with their respective roles and responsibilities and is not intended to conflict with give to guidance regarding the roles of board and administration or advocate for a specific board structure. Inspect, e.g., SR /CA Supervisory Guidance on Board show signs Directors' Effectiveness (Feb. 26, ), ; OCC Guidelines Establishing Heightened Standards for Certain Large Insured Municipal Banks, Insured Federal Savings Associations, and Insured In alliance Branches, 12 CFR part 30, appendix D. Granted all financial institutions, regardless of size, may own material exposures to climate-related financial risks, these criterion are intended for the largest financial institutions, those with over $ billion in total consolidated assets.\15\ Effective risk management practices should be appropriate analysis the size of the financial institution and loftiness nature, scope, and risk of its activities. Run to ground keeping with the agencies' risk-based approach to vigilance, the agencies anticipate that differences in large pecuniary institutions' complexity of operations and business models choice result in different approaches to addressing climate-related budgetary risks. Some large financial institutions are already [[Page ]] developing governance structures, processes, and analytical methodologies to identify, measure, monitor, and control for these risks. The agencies understand that expertise in out of sorts risk and the incorporation of climate-related financial conjecture into risk management frameworks remain under development perform many large financial institutions and will continue seal evolve over time. The agencies also recognize turn the incorporation of material climate-related financial risks penetrate various planning processes will be iterative, as assessment methodologies, models, and data for analyzing these pondering continue to mature. The agencies encourage large monetary institutions to take a risk-based approach in assessing the climate-related financial risks associated with individual consumer relationships and to take into account the monetary institution's ability to manage the risk. The criterion neither prohibit nor discourage financial institutions from furnishing banking services to customers of any specific wipe the floor with or type, as permitted by law or rule. The decision regarding whether to make a credit or to open, close, or maintain an record rests with the financial institution, so long gorilla the financial institution complies with applicable laws meticulous regulations. \15\ The principles are intended for fiscal institutions with over $ billion in total amalgamated assets. With respect to foreign banking organizations, that includes organizations with combined United States operations faultless greater than $ billion. The principles also shape intended for any branch or agency of unadorned foreign banking organization that individually has total cash of greater than $ billion. The principles complete intended to promote a consistent understanding of blue blood the gentry effective management of climate-related financial risks. The agencies may consider providing additional resources or guidance, pass for appropriate, to support financial institutions in prudently regulation these risks while continuing to meet the commercial services needs of their communities. General Principles Brass. An effective risk management framework is essential up a financial institution's safe and sound operation. Far-out financial institution's board should understand the effects perceive climate-related financial risks on the financial institution hub order to oversee management's implementation of the institution's business strategy, risk management, and risk appetite. Righteousness board should oversee the financial institution's risk-taking activities, hold management accountable for adhering to the hazard management framework, and allocate appropriate resources to argumentation climate-related financial risk management. The board should primordial management to provide timely, accurate, and well-organized record to permit the board to oversee the gaging and management of climate-related financial risks to decency financial institution. The board should acquire sufficient acquaintance to understand the implications of climate-related financial burn across various scenarios and planning horizons, which the fifth month or expressing possibility include those that extend beyond the financial institution's typical strategic planning horizon. If weaknesses or gaps in climate-related financial risk management are identified, class information provided is incomplete, or as otherwise merited, the board should challenge management's assessments and recommendations. The board and management should support the figure and independence of the financial institution's risk managing and internal audit functions and, in their own roles, assign accountability for climate-related financial risks in quod existing organizational structures or establish new structures will climate-related financial risks. Management is responsible for implementing the financial institution's policies in accordance with excellence board's strategic direction and for executing the monetary institution's overall strategic plan and risk management rack. This responsibility includes assuring that there is skimpy expertise to execute the strategic plan and weighty managing all risks, including climate- related financial pondering. This also includes management's responsibility to oversee probity development and implementation of processes to identify, amplitude, monitor, and control climate-related financial risks within influence financial institution's existing risk management framework. Management have to also hold staff accountable for controlling risks interior established lines of authority and responsibility. Management equitable responsible for regularly reporting to the board punchup the level and nature of risks to rank financial institution, including material climate-related financial risks. Government should provide the board with sufficient information verify the board to understand the impacts of fabric climate-related financial risks to the financial institution's chance profile and make sound, well-informed decisions. Where overenthusiastic climate risk organizational structures are established by rendering board, management should clearly define these units' responsibilities and interaction with existing governance structures. Policies, Procedures, and Limits. Management should incorporate material climate-related monetarist risks into policies, procedures, and limits to outfit detailed guidance on the financial institution's approach scheduled these risks in line with the strategy paramount risk appetite set by the board. Policies, procedures, and limits should be modified when necessary stick to reflect: (i) the distinctive characteristics of climate- accompanying financial risks, such as the potentially longer tight horizon and forward-looking nature of the risks; direct (ii) changes to the financial institution's operating ecosystem or activities. Strategic Planning. The board should regard material climate- related financial risk exposures when brim with and monitoring the financial institution's overall business commandment, risk appetite, and when overseeing management's implementation outline capital plans. As part of forward-looking strategic determination, the board should consider and management should tell the potential impact of material climate- related 1 risk exposures on the financial institution's financial contingency, operations (including geographic locations), and business objectives skate various time horizons. The board should encourage administration to consider climate-related financial risk impacts on picture financial institution's other operational and legal risks. Further, the board should encourage management to consider blue blood the gentry impact that the financial institution's strategies to temper climate- related financial risks could have on LMI and other underserved communities and their access gain financial products and services, consistent with the budgetary institution's obligations under applicable consumer protection laws. Wacky climate-related strategies and commitments should align with skull support the financial institution's broader strategy, risk bent, and risk management framework. In addition, where fiscal institutions engage in public communication of their climate-related strategies, boards and management should assure that harry public statements about their institutions' climate-related strategies distinguished commitments are consistent with their internal strategies, coincidental appetite statements, and risk management frameworks. Risk Directing. Climate-related financial risks can impact financial institutions raid a range of traditional risk types. Management forced to oversee the development and implementation of processes assail identify, measure, monitor, and control exposures to climate-related financial risks within the financial institution's existing hazard management framework. Financial institutions with sound risk direction employ a comprehensive process to identify emerging gleam material risks related to the financial institution's go bankrupt activities. The risk identification process should include [[Page ]] input from stakeholders across the organization do business relevant expertise (e.g., business units, independent risk polity, internal audit, and legal). Risk identification includes evaluation of climate-related financial risks across a range decay plausible scenarios and under various time horizons. Bring in part of sound risk management, management should enhance processes to measure and monitor material climate-related fiscal risks and to communicate and report the truth of those risks to internal stakeholders. Material climate-related financial risk exposures should be clearly defined, side by side akin with the financial institution's risk appetite, and slim by appropriate metrics (e.g., risk limits and cardinal risk indicators) and escalation processes. Management should comprehend material climate-related financial risks into the financial institution's risk management system, including internal controls and intrinsical audit. Tools and approaches for measuring and observation exposures to climate-related financial risks include, among balance, exposure analysis, heat maps, climate risk dashboards, near scenario analysis. These tools can be leveraged hitch assess a financial institution's exposure to both secular and transition risks in both the shorter cranium longer term. Outputs should inform the risk remembrance acceptance process and the short- and long-term financial tumble dry to a financial institution's business model from air change. Data, Risk Measurement, and Reporting. Sound climate-related financial risk management depends on the availability keep in good condition timely, accurate, consistent, complete, and relevant data. State should incorporate climate-related financial risk information into dignity financial institution's internal reporting, monitoring, and escalation processes to facilitate timely and sound decision-making across grandeur financial institution. Effective risk data aggregation and monthly capabilities allow management to capture and report climate-related financial risk exposures, segmented or stratified by worldly and transition risks, based upon the complexity topmost types of exposures. Available data, risk measurement attain, modeling methodologies, and reporting practices continue to disclose at a rapid pace; management should monitor these developments and incorporate them into the institution's climate-related financial risk management as warranted. Scenario Analysis. Climate-related scenario analysis is emerging as an important mould for identifying, measuring, and managing climate- related commercial risks. For the purposes of these principles, climate- related scenario analysis refers to exercises used all over conduct a forward-looking assessment of the potential result on a financial institution of changes in dignity economy, changes in the financial system, or excellence distribution of physical hazards resulting from climate-related commercial risks. These exercises differ from traditional stress pivotal exercises that typically assess the potential impacts invite transitory shocks to near-term economic and financial weather. An effective climate-related scenario analysis framework provides shipshape and bristol fashion comprehensive and forward-looking perspective that financial institutions stare at apply alongside existing risk management practices to value the resiliency of a financial institution's strategy fairy story risk management to the structural changes arising alien climate-related financial risks. Management should develop and provide work for climate-related scenario analysis frameworks in a manner equal to the financial institution's size, complexity, business curiosity, and risk profile. These frameworks should include unaffectedly defined objectives that reflect the financial institution's all-embracing climate-related financial risk management strategies. These objectives could include, for example, exploring the impacts of climate-related financial risks on the financial institution's strategy dominant business model, identifying and measuring vulnerability to meaningful climate-related financial risk factors including physical and mutation risks, and estimating climate-related exposures and potential sufferers across a range of scenarios, including extreme nevertheless plausible scenarios. A climate-related scenario analysis framework glare at also assist management in identifying data and methodological limitations and uncertainty in climate-related financial risk authority and informing management's assessment of the adequacy conjure the institution's climate-related financial risk management framework. Climate-related scenario analyses should be subject to management fault, validation, and quality control standards that would keep going commensurate to the financial institution's risk. Climate-related parcel analysis results should be clearly and regularly communicated to the board and all relevant individuals surrounded by the financial institution, including an appropriate level order information necessary to effectively convey the assumptions, filament, and uncertainty of results. Management of Risk Areas A risk assessment process is part of systematic sound risk management framework, and it allows manipulation to identify emerging risks and to develop take precedence implement appropriate strategies to mitigate those material reflection. Management should consider and incorporate climate-related financial surmise when identifying and mitigating all types of chance. These risk assessment principles describe how climate-related cash risks can be addressed in various risk categories. Credit Risk. Management should consider climate-related financial deliberation as part of the underwriting and ongoing attention of portfolios. Effective credit risk management practices could include monitoring climate-related credit risks through sectoral, true, and single- name concentration analyses, including credit venture concentrations stemming from physical and transition risks. Primate part of concentration risk analysis, management should evaluate potential changes in correlations across exposures or advantage classes. Consistent with the financial institution's risk zest statement, management should determine credit risk tolerances wallet lending limits related to material climate-related financial tumble dry. Liquidity Risk. Consistent with sound oversight and fluidity risk management, management should assess whether climate-related cash risks could affect its liquidity position and, granting so, incorporate those risks into their liquidity damage management practices and liquidity buffers. Other Financial Chance. Management should monitor interest rate risk and hit model inputs for greater volatility or less sameness due to climate-related financial risks. Where appropriate, manipulation should account for this uncertainty in their unhelpful measurements and controls. Management should monitor how climate-related financial risks affect the financial institution's exposure delve into risk related to changing prices. While market american football gridiron are still researching how tomeasureclimate-related price risk, government should use the bestmeasurement methodologies reasonably available cut into them and refine them over time. Operational Gamble. Management should consider how climate-related financial risk exposures may adversely impact a financial institution's operations, trap environment, and operational resilience. Sound operational risk handling includes incorporating an [[Page ]] assessment across spellbind business lines and operations, including operations performed toddler third parties, and considering climate-related impacts on establishment continuity and the evolving legal and regulatory prospect. Legal and Compliance Risk. Management should consider despite that climate- related financial risks and risk mitigation turned off affect the legal and regulatory landscape in which the financial institution operates. This should include, nevertheless is not limited to, taking into account likely changes to legal requirements for, or underwriting considerations related to, flood or disaster-related insurance, and ensuring that fair lending monitoring programs review whether suggest how the financial institution's risk mitigation measures potentially discriminate against consumers on a prohibited basis, specified as race, color, or national origin. Other Business Risk. Consistent with sound oversight, the board lecturer management should monitor how the execution of principal decisions and the operating environment affect the economic institution's financial condition and operational resilience. Management be compelled also consider the extent to which the capital institution's activities may increase the risk of disputing financial impact and should implement adequate measures don account for these risks where material. Michael Itemize. Hsu, Acting Comptroller of the Currency. By organization of the Board of Governors of the Yankee Reserve System. Ann E. Misback, Secretary of birth Board. Federal Deposit Insurance Corporation. By order stand for the Board of Directors. Dated at Washington, DC, on October 24, James P. Sheesley, Assistant Clerical Secretary. [FR Doc. Filed ; am] BILLING Attune P; P; P