On March 30, 2022, the Federal Deposit Insurance Corporation (“FDIC”) released a proposed policy statement related to sound management of exposures to climate-related financial risks (the “Proposal”).  The Proposal is targeted at FDIC-supervised financial institutions with more than $100 billion in total consolidated assets (“covered banks”) and is intended to provide a high-level framework for the safe and sound management of climate-related financial risks by covered banks and serve as the basis for more detailed guidance the FDIC expects to issue in the future.

The Proposal includes both a general set of principles for the management of climate-related financial risks and brief descriptions of how those risks can be assessed in various risk categories.  In these substantive respects, the Proposal effectively mirrors a similar proposal issued by the Office of the Comptroller of the Currency in December 2021 on a nearly verbatim basis.  (See Covington’s prior client alert on that OCC proposal here for a discussion of the substance of that proposal, which applies equally to the FDIC’s more recent Proposal.)  However, the preamble discussion that accompanies the Proposal does include several statements not contained in the December 2021 OCC proposal, most notable of which are statements that “the manner in which financial institutions manage climate-related financial risks to address safety and soundness concerns should also seek to reduce or mitigate the impact that management of these risks may have on broader aspects of the economy, including the disproportionate impact of risk on LMI and other disadvantaged communities” and that “[t]hrough this and any subsequent climate-related financial risk guidance, the FDIC will continue to encourage institutions to prudently meet the financial services needs of their communities.”

Like the OCC’s December 2021 proposal, the Proposal both requests public comment in general and poses a range of specific questions for commenters to consider.  These questions largely mirror those posed in the OCC proposal, but also include an additional question asking whether the FDIC or other agencies should “modify existing regulations and guidance, such as those associated with the Community Reinvestment Act, to address the impact climate-related financial risks may have on LMI and other disadvantaged communities.”

Comments are due sixty days after the Proposal is published in the Federal Register, which is likely to occur in the next several weeks.

Tags: climate-related financial risks, FDIC, risk management principles
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Photo of Mike Nonaka Mike Nonaka

Michael Nonaka is co-chair of the Financial Services Group and advises banks, financial services providers, fintech companies, and commercial companies on a broad range of compliance, enforcement, transactional, and legislative matters.

He specializes in providing advice relating to federal and state licensing and…

Michael Nonaka is co-chair of the Financial Services Group and advises banks, financial services providers, fintech companies, and commercial companies on a broad range of compliance, enforcement, transactional, and legislative matters.

He specializes in providing advice relating to federal and state licensing and applications matters for banks and other financial institutions, the development of partnerships and platforms to provide innovative financial products and services, and a broad range of compliance areas such as anti-money laundering, financial privacy, cybersecurity, and consumer protection. He also works closely with banks and their directors and senior leadership teams on sensitive supervisory and strategic matters.

Mike plays an active role in the firm’s Fintech Initiative and works with a number of banks, lending companies, money transmitters, payments firms, technology companies, and service providers on innovative technologies such as bitcoin and other cryptocurrencies, blockchain, big data, cloud computing, same day payments, and online lending. He has assisted numerous banks and fintech companies with the launch of innovative deposit and loan products, technology services, and cryptocurrency-related products and services.

Mike has advised a number of clients on compliance with TILA, ECOA, TISA, HMDA, FCRA, EFTA, GLBA, FDCPA, CRA, BSA, USA PATRIOT Act, FTC Act, Reg. K, Reg. O, Reg. W, Reg. Y, state money transmitter laws, state licensed lender laws, state unclaimed property laws, state prepaid access laws, and other federal and state laws and regulations.

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Photo of Karen Solomon Karen Solomon

Karen Solomon advises clients on a broad range of financial services regulatory matters. Karen’s extensive experience working in agencies that supervise national banks and Federal savings associations enables her to offer an informed, practical approach to addressing regulatory issues.

Before joining Covington, Karen …

Karen Solomon advises clients on a broad range of financial services regulatory matters. Karen’s extensive experience working in agencies that supervise national banks and Federal savings associations enables her to offer an informed, practical approach to addressing regulatory issues.

Before joining Covington, Karen served as the Acting Senior Deputy Comptroller and Chief Counsel at the Office of the Comptroller of the Currency (OCC). In that role and in her prior role as Deputy Chief Counsel, Karen’s work included developing and drafting regulations and advising on issues involving bank powers, structure, compliance, and preemption as well as on licensing, legislative, and litigation-related matters. She had a leadership role in key OCC initiatives, including the agency’s implementation of the Volcker rule, recent fintech chartering initiative, and federal preemption efforts. She also worked extensively with other Federal agencies on joint or collaborative regulatory projects. Karen joined the OCC in 1995. Before that, she was Deputy Chief Counsel at the Office of Thrift Supervision (OTS) and, earlier, held senior positions at the OTS’s predecessor agency, the Federal Home Loan Bank Board.

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Photo of Randy Benjenk Randy Benjenk

Randy Benjenk is a partner in Covington’s industry-leading Financial Services Group and focuses his practice on regulatory advice and advocacy. He represents domestic and foreign banks, fintech companies, and trade associations on compliance issues, corporate transactions, and public policy matters.

Chambers USA says…

Randy Benjenk is a partner in Covington’s industry-leading Financial Services Group and focuses his practice on regulatory advice and advocacy. He represents domestic and foreign banks, fintech companies, and trade associations on compliance issues, corporate transactions, and public policy matters.

Chambers USA says Randy has received “widespread praise” from clients, who describe him as “excellent” and say that “the quality of his legal work and his writing abilities were incredible” and “he’s very easy to work with, knowledgeable and efficient.”

Randy regularly advises clients on a wide range of regulatory matters, including:

  • Bank Activities and Prudential Regulation. Complex bank activities, structure, licensing, and prudential matters, often involving issues of first impression at the federal and state banking agencies.
  • Corporate Transactions. Mergers and acquisitions, spinoffs, charter conversions, debt and equity issuances, investments, strategic partnerships, de novo bank formations, and related regulatory applications and disclosures.
  • Private Equity Investments. Private equity investments in banks, bank investments in private funds, and fund structuring related to the Volcker Rule and Bank Holding Company Act.
  • Public Policy Matters. Regulatory and legislative policy matters, with an emphasis on changes arising out of U.S. banking legislation and international standards.
  • Crisis Response. Navigating extraordinary events, such as the COVID-19 pandemic and related governmental responses, and firm-specific matters.
  • Supervisory and Enforcement Matters. Compliance and safety and soundness issues that arise in the examination and enforcement contexts.
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Photo of Lindsay Brewer Lindsay Brewer

Lindsay Brewer is an associate in the firm’s Washington office. She advises clients on environmental, product safety, occupational safety, and public policy issues. She has experience with a wide range of environmental and safety programs, with a focus on the Clean Air Act…

Lindsay Brewer is an associate in the firm’s Washington office. She advises clients on environmental, product safety, occupational safety, and public policy issues. She has experience with a wide range of environmental and safety programs, with a focus on the Clean Air Act (CAA), the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA/Superfund), the Federal Trade Commission Act (FTC Act), the Consumer Product Safety Act (CPSA), the Federal Motor Vehicle Safety Standards (FMVSS), and the Occupational Safety and Health Act (OSH Act).

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