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Michael Hsu, the acting Comptroller of the Currency, said in a
speech Monday that bank boards should press their executives for
detailed answers on climate change. He suggested management
should be able to detail their plans for bank supervisors by
next year.
Hsu added that within his office, supervisors are developing a
framework for how banks should properly manage climate risk, and
he expects to issue guidance by the end of this year. Some of
the largest banks overseen by his office include JPMorgan Chase,
Wells Fargo and Bank of America.
"Climate change poses significant risks to the financial system.
Detailed reports have been published. Eloquent words have been
spoken. It is time to convert those words into action," he said
in his prepared remarks.
Hsu suggested banks should be able to determine and track their
overall risk to climate change, including which counterparties
or areas merit closer watch in their portfolios. Another area
Hsu said banks should monitor is their exposure to a potential
carbon tax. Banks should prepare for "transition risks" that
come from a policy shift to a low-carbon economy, in addition to
physical risks.
On a more tangible level, Hsu also said banks should be aware of
how their physical infrastructure, such as data centers, could
be impacted by worsening weather events spurred by climate
change.
"Banks increasingly are dependent on third-party vendors for a
range of things, including critical services. To the extent that
critical service providers are vulnerable to climate change,
banks’ abilities to continue critical operations may be
affected," he said.
(Reporting by Pete Schroeder; Editing by Lisa Shumaker)
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