InfoBytes Blog
OCC’s Hsu discusses climate financial risk management, diversity and inclusion
On March 7, acting Comptroller of the Currency Michael J. Hsu spoke before the Institute of International Bankers Annual Washington Conference to discuss climate-related financial risk and diversity and inclusion in the banking industry. In his remarks, Hsu described the agency as “laser-focused on the safety and soundness aspects of climate change risks.” Specifically, he noted that the OCC is concentrating on “large banks’ climate risk management capabilities: identifying, measuring, monitoring and mitigating climate-related exposures and risks.” He stated that “[w]eaknesses in risk management could adversely affect a bank’s safety and soundness, as well as the overall financial system.” Hsu also stressed the importance of cyber defense, saying “[h]eightened vigilance is clearly warranted.”
Hsu further discussed draft principles, which were released in December 2021, and are intended to support the identification and management of climate-related financial risks at OCC-regulated institutions with over $100 billion in total consolidated assets. (Covered by InfoBytes here). He noted that the principles will be finalized later this year when more detailed guidance will be developed in collaboration with the Federal Reserve Board and FDIC. After “an appropriate transition period,” Hsu noted that an assessment of large banks’ climate risk management capabilities would begin. He also noted that for midsize and community banks, it will be a number of years before OCC examiners conduct climate risk management examinations and suggested to bankers to use time “wisely.”
At the end of his remarks, Hsu compared “diversity and inclusion” to “safety and soundness,” in that it should be treated as a single idea, and without it, “diversity over time becomes a box to be checked, not a state to strive for or a value to be upheld.”