industries disfavored by certain policymakers not only plays favorites between legal industries, it threatens to harm many local economies that community banks serve. If climate risk proposals are not intended to choke off specific industries from the financial system, regulators should expressly state there is no supervisory expectation that banks de-risk legal but climate-disfavored industries. Sustainability is central to community banks’ business model with their longstanding underwriting and insurance practices addressing the impact of severe weather events and natural disasters since the early 19th century. When local environments flourish, community banks flourish. But subjecting community banks to mandatory climate risk regulation or enhanced climatedisclosure requirements is unnecessary and would only restrict their ability to meet their communities’ needs. Regulators should reconsider their climate risk proposals and their adverse effects on local communities. Rebeca Romero Rainey is President and CEO of the Independent Community Bankers of America. 828 Main St, 15th Floor Lynchburg VA 24504 www.countsauction.com Call us for your Auction & Appraisal needs. 434-525-2991 OCC examiners will conduct climate risk management examinations on community banks in the coming years. Regulators should not impose climate risk regulations on community banks for the following reasons: First, current risk management practices protect community banks from climate-related financial risks, as evidenced by the absence of community bank failures following severe weather events. As Gruenberg noted, community banks have employed a range of risk management strategies for generations and know their communities and loan portfolios better than anyone else. Rather than impose new climaterelated guidelines on community banks, regulators should continue to utilize existing and effective risk management supervision practices, which will avoid duplicating requirements and introducing new regulatory burdens. Second, the FDIC, OCC, and SEC published their proposals without any supporting studies to demonstrate climate risk is a threat to bank safety and soundness, raising questions about the validity of their assumptions. Before contemplating new policies, the agencies should first conduct studies and gather empirical data to determine the extent to which climate-related financial risks affect the safety, soundness, and stability of community banks and the financial system. The lack of empirical data points to the third key concern with these proposals — that the government’s ultimate motive is to choke off legal but disfavored businesses and industries from the financial system. While community banks typically are not the primary source of financing for large energy-producing companies, they do provide the majority of smallbusiness credit in communities in which energy production, refinement, agriculture, and transportation businesses exist. Reintroducing the “Operation Choke Point” policy of using the financial system to target Ultimately, these proposals would cut off local communities from the community banks that best understand and best serve local environments. 17 Pub. 12 2023 Issue 1
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