WASHINGTON—Acting Comptroller of the Currency Michael J. Hsu today issued the following at the Financial Stability Oversight Council (FSOC) meeting:
Thank you, Madam Secretary, for your strong leadership of the Council including on this important matter. I would also like to extend my thanks to the FSOC staff and the staff of the Council members for their efforts relating to climate-related financial risk.
I support the publication of the updated report on Climate-related Financial Risk Committee (CFRC) activities. It will help financial institutions to manage the climate-related financial risks they face, thereby promoting safety and soundness and financial stability. Each FSOC member has a role to play in this. Coordination of our respective efforts through the CFRC is critical.
I would like to highlight in particular the efforts of the CFRC Risk Assessment Working Group. Staff participating in the group are developing a framework to identify and assess climate-related financial risk. This includes a preliminary set of risk indicators for banking, financial, and insurance markets. Understanding how physical and transition risks stemming from climate change may manifest as financial risk will be critical.
Further, as the FSOC report reflects, the Federal banking agencies have each proposed high-level principles underpinning a risk management framework to address climate-related financial risk and are coordinating in the review of public comments.
Finally, I would like to observe that many large banks have been proactive in incorporating climate-related financial risks in their risk management frameworks and policies. This includes updating their strategic planning processes, incorporating climate risk into their risk appetite statements, and using scenario analysis to better understand future risks. The OCC will continue to monitor progress and encourage safe and sound practices at large banks, pending next steps with the proposed climate risk management principles.
The OCC looks forward to continuing to work with the other FSOC members, financial institutions, and others to address climate-related financial risk.