Three major U.S. banking regulators—the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC)—have rescinded interagency guidance on climate-related financial risk management. This action, effective November 18, 2025, reverses principles issued in October 2023 that were designed for financial institutions with over $100 billion in total consolidated assets. The decision reflects a view that existing risk management standards are adequate, potentially avoiding distractions from other emerging risks. This development marks a shift in regulatory priorities, highlighting tensions between specialized risk guidance and broader safety and soundness requirements.
Background and Development of the Principles
The rescinded principles originated from separate agency requests for comment in late 2021 and 2022. The OCC issued Bulletin 2021-62 in December 2021, seeking feedback on climate-related risk management for large banks. The FDIC followed with a request in April 2022, published at 87 FR 19507, and the Board issued its version in December 2022 at 87 FR 75267. These efforts culminated in joint principles published on October 30, 2023, at 88 FR 74183.
The principles aimed to help large financial institutions—defined to include national banks, federal savings associations, U.S. branches of foreign banks, state member and nonmember banks, bank holding companies, and non-bank systemically important financial institutions (SIFIs)—identify, measure, monitor, and mitigate risks from climate change. This included physical risks like extreme weather events and transition risks from shifts to a low-carbon economy. The guidance was not binding but encouraged integration into overall risk frameworks.
A key turning point occurred on March 31, 2025, when the OCC withdrew its participation, as announced in News Release 2025-27. This set the stage for the full interagency rescission, underscoring evolving regulatory perspectives amid changing political and economic landscapes.
Key Players and Regulatory Context
The primary agencies involved are the OCC, which oversees national banks and federal savings associations; the Board, responsible for state member banks, bank holding companies, and SIFIs; and the FDIC, which insures deposits and supervises state nonmember banks. Contacts listed in the notice include OCC's Russell D'Costa and Melissa Love-Greenfield, the Board's Anna Lee Hewko and Asad Kudiya, and the FDIC's Andrew Carayiannis and Lauren Brown.
This rescission aligns with longstanding safety and soundness standards under Section 39 of the Federal Deposit Insurance Act (12 U.S.C. 1831p-1), implemented in regulations like 12 CFR part 364 Appendix A (FDIC), 12 CFR part 208 Appendix D-1 (Board), and 12 CFR part 30 Appendix A (OCC). These require institutions to maintain effective risk management processes covering internal controls, credit underwriting, and interest rate exposure, among others. Additional guidance, such as the Board's SR Letter 95-51 (revised June 23, 2025) and SR Letter 21-3, the OCC's Comptroller's Handbook, and the FDIC's Risk Management Manual, emphasizes resilience to a range of risks.
The agencies' rationale—that specialized climate principles are unnecessary and could divert attention from other risks—echoes broader debates in financial regulation. For instance, it contrasts with international efforts like those from the Basel Committee on Banking Supervision, which has incorporated climate risks into supervisory frameworks.
Reasons for Rescission and Supporting Evidence
The notice states that existing standards already mandate risk management commensurate with an institution's size, complexity, and activities. Financial institutions are expected to address all material risks, including emerging ones, without needing climate-specific guidance. The agencies express concern that such principles 'could distract from the management of other potential risks identified and addressed by financial institutions' existing risk management processes and the agencies' other risk management rules and guidance.'
A footnote clarifies that neither the principles nor the rescission mandates or prohibits consideration of specific risks, nor creates rights or obligations. This neutral stance aims to preserve flexibility. The decision follows the OCC's unilateral withdrawal, suggesting internal agency dynamics or external pressures influenced the outcome.
Administrative considerations include Executive Order 12866, where the Office of Management and Budget deemed the rescission a 'significant regulatory action.' Under the Paperwork Reduction Act (44 U.S.C. 3501-3521), no new information collections are created, so no OMB review was needed.
Implications and Perspectives
Short-term implications include reduced emphasis on climate-specific reporting or strategies for large institutions, potentially easing compliance burdens. Institutions may continue voluntary climate risk assessments but without regulatory prompting. Long-term, this could affect how U.S. banks align with global standards, where peers in Europe and Asia face stricter climate mandates.
Perspectives vary: Proponents of the rescission, including some industry groups, argue it prevents overregulation and focuses on core risks like credit and liquidity. Critics, such as environmental advocates and some investors, contend it overlooks systemic threats from climate change, potentially leaving banks vulnerable. For example, a 2023 Federal Reserve pilot exercise highlighted physical risks to bank portfolios from events like hurricanes.
Legal precedents, such as the Supreme Court's decision in West Virginia v. EPA (2022), which limited agency authority on major questions without clear congressional intent, may indirectly influence this caution against expansive guidance. Politically, the timing amid a Republican administration suggests alignment with deregulation efforts.
In conclusion, this rescission underscores the agencies' confidence in general risk frameworks while highlighting debates over specialized guidance. Potential next steps include monitoring how institutions adapt, possible congressional oversight, or future guidance revisions if climate risks escalate. Ongoing challenges involve balancing innovation with resilience, amid differing views on regulatory scope. (Word count: 912)