Better Markets filed a comment letter to the Federal Deposit Insurance Corporation (FDIC) on their request for comments regarding its proposed principles for climate-related financial risk management for large banks.

Why It Matters. Climate risks have been recognized in the U.S. and internationally as risks that pose a threat to the safety and soundness of banks as well as overall financial stability. As a broadly recognized and clearly material risk, climate risks must be a part of banks’ risk management and governance practices and assessing those must be part of the supervisory assessment processes of bank. Supervisory principles are critical to addressing climate-related financial risks. They serve as the foundational principles on which banks develop their risk management processes and provide supervisors with a framework to assess and identify issues with banks’ risk management processes.

What We Said. Better Markets applauds the publication of the FDIC’s principles as an important step in addressing climate risks, which can have serious effects on the safety and soundness of banks as well as overall financial stability. Considering the broad range of risks that climate change can pose, we welcome the FDIC’s approach of largely integrating climate risks into existing risk management principles with some additions that capture unique aspects of climate risks and for doing so in a way that is consistent with the Office of the Comptroller of the Currency’s proposed principles.

Bottom Line. Better Markets is supportive of the FDIC to fully incorporate climate risks into the supervisory assessment process. The proposed principles are a significant and positive step in doing so, and we urge the FDIC to finalize these principles as soon as possible and incorporate the enhancements we discuss above.

Read our full Comment Letter here or click the button below.