U.S. Regulators Withdraw Climate-Related Risk Rules for Major Banks

WASHINGTON — In a fresh reversal of post-Paris financial policy, U.S. banking regulators have withdrawn landmark guidance on climate-related financial risks, erasing a federal framework that had directed the largest banks to account for climate exposure in governance and risk management. The Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) announced the move on October 16, 2025.

The step rescinds the Interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions, first finalized in 2023 and aimed at banks with over $100 billion in assets. The agencies said existing “safety and soundness” standards already require firms to manage all material risks, including emerging risks, making separate climate principles unnecessary.

“Existing Rules Are Enough”

In their notices, supervisors described the withdrawal as a streamlining move, emphasizing that institutions remain responsible for robust risk management across credit, market, operational, and liquidity risks — regardless of source. The OCC had withdrawn its participation in the interagency principles earlier this year; Thursday’s action completes a system-wide rollback.

Critics argue the shift is political as much as procedural. While the principles were non-binding, they had pushed boards and senior management at the largest banks to incorporate climate risks into governance, scenario analysis, and portfolio oversight — steps many saw as precursors to standardized supervisory expectations. Industry groups and some lawmakers had urged regulators to scrap what they called “politicized” guidance.

From Oversight to Omission

Supporters of the 2023 framework say climate-amplified perils — from physical risks like storms and heat to transition risks tied to stranded assets — can be systemic. The rollback aligns with the Trump administration’s broader deregulatory agenda across financial agencies and follows months of pressure to pare back climate-related requirements. Bloomberg and other outlets reported the change as part of a wider recalibration of prudential policy this week.

Banks are split. Global lenders with footprints in Europe are likely to maintain internal climate-risk processes to meet EU and international expectations. Others may scale back, arguing that generic risk rules suffice.

Global Divergence

The U.S. move widens a gap with peers. The ECB, Bank of England, and Canada’s OSFI continue integrating climate risk into supervision and stress testing, while the Basel Committee in June 2025 opted for a voluntary climate disclosure framework, leaving rigor to national authorities.

The Policy Consequences

With formal U.S. guidance withdrawn, large banks have greater discretion in whether — and how — to quantify and manage climate risk in loan books and trading portfolios. That could increase regulatory arbitrage between U.S. and European institutions and complicate cross-border capital standards.

It also raises questions for investors relying on standardized disclosures. The SEC’s climate-reporting rule remains stayed and the litigation is in abeyance at the Eighth Circuit, leaving it as one of the remaining federal mechanisms linking finance and climate risk — but its fate is uncertain.

A Step Back for Climate Finance

For reform advocates, the episode underscores how easily supervisory policy can swing without statutory backing. Guidance that took years to craft can be reversed in a single notice. For markets, the signal is clear: the United States is stepping back from embedding climate risk in prudential supervision even as other jurisdictions continue to price it in.

For global regulators and development institutions, the withdrawal deepens uncertainty just as climate shocks are testing economic stability worldwide. As the world’s largest financial system steps back, others must weigh how to keep capital aligned with resilience, adaptation, and the broader goals of sustainable development.

Related Content: Basel Committee Unveils Voluntary Climate Risk Disclosure Framework for Banks