smanas@imfpubs.com

The New York Department of Financial Services this week rolled out proposed guidance for state-regulated banks and mortgage institutions regarding climate change-related safety and soundness issues and risk management.

Among other things, the regulatory language focuses on corporate governance, internal control frameworks, data aggregation and reporting.

If the state gets its way, financial service firms will need to have processes in place to understand and assess the impact of climate-related financial risks. Meaning? Lenders will need to incorporate climate-related financial risks in their internal control frameworks across three lines of defense: risk-taking, risk management and an internal audit function.

The agency wants feedback on whether there should be an implementation timeline and how small institutions can benefit from climate scenario analysis and other issues. The comment period ends March 21.  The regulator is hosting a webinar on Jan. 11 to discuss the guidance.

NYDFS Superintendent Adrienne Harris said the department “is committed to working with all stakeholders to further refine expectations and finalize guidance appropriate for institutions to address material climate-related financial risks.”