U.S. Fed proposes framework for how banks manage climate-related financial risk

The U.S. Federal Reserve Board on Friday proposed new guidance for how large banking institutions manage climate-related financial risks, following proposals from other key financial regulators. The proposed principles detailed expectations for banks with more than $100 billion in assets to incorporate financial risks related to climate into their strategic planning.

The U.S. Federal Reserve Board on Friday proposed new guidance for how large banking institutions manage climate-related financial risks, following proposals from other key financial regulators.

The proposed principles detailed expectations for banks with more than $100 billion in assets to incorporate financial risks related to climate into their strategic planning. Issuance of the proposal for public comment was approved in a 6-1 vote of the Fed Board of Governors, with Governor Christopher Waller dissenting. The new framework would apply to banks' governance; policies, procedures and limits; strategic planning; risk management; data, risk measurement and reporting; and scenario analysis, the Board said.

Among the changes for banks would be the addition of climate-related financial risks in audits and the addition of climate-related scenario analysis to traditional stress testing. The proposal will be open for public comment for 60 days.