DFS SUPERINTENDENT HARRIS PROPOSES GUIDANCE FOR NEW YORK STATE-REGULATED BANKING AND MORTGAGE INSTITUTIONS RELATING TO MANAGEMENT OF SAFETY & SOUNDNESS RISKS FROM CLIMATE CHANGE
- Source: dfs.ny.gov
Takeaway:
Treliant’s Credit Solutions practice comprises former senior financial services risk executives and regulators who combine their extensive experience, qualifications, and know-how to assist financial institutions navigate today’s volatile market environment. We provide financial institutions consulting support on credit risk management and governance, portfolio management, climate stress testing, loan workouts, advice on portfolio risk-mitigation strategies. We also provide loan review services for financial institutions.
Highlights:
On December 21, 2022 the New York State Department of Financial Services (DFS) Superintendent Adrienne A. Harris announced new proposed guidance for New York State-regulated banking and mortgage institutions (Institutions) to help them manage safety and soundness risks related to climate change.
The proposed guidance supports efforts by Institutions to identify, measure, monitor, and control their material climate-related financial risks, consistent with existing risk management principles. The DFS is also seeking to align the guidance with the work of federal and international banking regulators on the management of climate-related financial risk.
The proposed guidance focuses on the following components of prudent risk management by Institutions: corporate governance; internal control framework; risk management process; data aggregation and reporting; and scenario analysis. Institutions are expected to minimize and affirmatively mitigate adverse impacts on low- and moderate-income communities while managing climate-related financial risks.
Superintendent Harris stated that the “DFS is committed to working with all stakeholders to further refine expectations and finalize guidance appropriate for Institutions to address material climate-related financial risks.”
The DFS views the proposed guidance as a basis for supervisory dialogue with Institutions building on the public feedback from regulated entities and key stakeholders. The DFS is encouraging input as it formulates the final guidance with a proportionate, data-driven approach. Collaboration and continuing conversations with external stakeholders—from consumer advocates, the Legislature, and industry, to banking regulatory counterparts—is critical to developing balanced and practical guidance.