What Happened?
On October 16, 2025, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board (“FRB”), and the Office of the Comptroller of the Currency (“OCC”) (collectively, the “bank regulators”) announced that they intend to rescind the interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions (“Climate Principles”).
Why Does it Matter?
The Climate Principles, initially issued in 2023, require large financial institutions with consolidated assets over $100 billion to consider climate-related financial risk management in line with regulator risk expectations (including for governance, compliance management, strategic planning, and risk management). The banking regulators’ move to rescind the Climate Principles follows the OCC’s withdrawal from them on March 31.
This recission signals the bank regulators’ shifting view of how climate change considerations should impact individual bank policy, which is consistent with President Trump’s rescission of the Biden Administration’s executive order on climate-related financial risk. The FRB staff noted in a memo to the Federal Reserve Board of Governors that they believe the Climate Principles “are not necessary and may be distracting large financial institutions from the management of material financial risks.” (Previously, FRB Vice Chair for Supervision Michelle W. Bowman argued in 2023, when the Climate Principles were initially issued, that they “increased compliance cost and burden without a commensurate improvement to the safety and soundness of financial institutions.” She also expressed concerns that examiners would be pressured to apply the Climate Principles’ expectations on smaller banks.)
What Do You Need to Do?
Guidance from the bank regulators emphasize that banks must continue to assess all material risks and should be resilient to a range of risks. This does not completely rule out that a bank may need to prepare for climate-related risks, but it removes the spotlight from these risks if they are not deemed “material,” such as those that are present, in the words of FRB Vice Chair Bowman, over an “indefinite time horizon.” The rescission of the Climate Principles will take effect immediately upon publication of a formal notice in the Federal Register (currently pending); the bank regulators issued a draft notice in advance of that publication.
The banking regulators’ withdrawal of the Climate Principles does not impact parallel state action to address risks associates with climate change. Shortly after the Climate Principles were issued in 2023, the New York Department of Financial Services issued its own guidance for financial institutions regarding climate change risks. This guidance remains in effect for all New York state regulated mortgage lenders and servicers, banking organizations, licensed branches, and agencies of foreign banking organizations. Thus, even when the Climate Principles are rescinded, regulated financial institutions may have cause to remain attuned to related risks.