Focus on climate risk by the Office of the Comptroller of the Currency is all about safety and soundness, Acting Comptroller Michael J. Hsu told bankers gathered near Austin for the Texas Bankers Association annual convention on May 19. TBA President Chris Furlow discussed industry issues with Hsu in a 25-minute digital interview.
“We are approaching climate change through a risk management lens,” Hsu said. “We are considering climate change risk like you would approach any kind of risk. You have to identify your risk, measure your risk, monitor your risk, and you’ve got to manage your risk. That’s it. We do not have a mandate to do industrial policy. We do not have a mandate to say ‘lend more to them and less to them.’”
Hsu reminded the group that the OCC’s climate change interest is currently focused only on banks with more than $100 billion in assets and above.
“At the OCC we are not going to be coming to any banks under $100 billion any time soon,” Hsu said regarding climate change. “You’ve got lots of time, and my advice is use the time wisely.”
Hsu said he does not expect policies aimed at the largest banks to eventually be applied to smaller banks.
“The thing I hear every time I talk to community bankers is that they worry that things trickle down … that policy made for the largest banks gets dropped on them. I don’t want to do that. I really don’t think it makes sense,” he said.
“I think community bank level issues are very different,” Hsu elaborated. “In community banking, issues are very local. What you have to do in a community bank in Texas is very different from what you have to do in Illinois or in Washington or Maine, so it doesn’t make sense to have an elaborate one-size-fits-all solution.
“But what does it mean? What are we exposed to?” Hsu asked. “That’s why I say use your time wisely. You are going to have several years to think that through.”
Hsu was appointed Acting Comptroller of the Currency by U.S. Treasury Secretary Janet Yellen on May 10, 2021.
The comptroller also serves as a director of the FDIC and a member of the Financial Stability Oversight Council and the Federal Financial Institutions Examination Council.
Prior to joining the OCC, Hsu served as an associate director in the Division of Supervision and Regulation at the Federal Reserve Board of Governors. He co-chaired the Federal Reserve’s Systemic Risk Integration Forum, served as a member of the Basel Committee Risk and Vulnerabilities Group, and co-sponsored forums promoting interagency coordination with foreign and domestic financial regulatory agencies.