Initially published in October 2023, these principles were meant to help large banks with $100 billion or more in assets identify and manage the financial risks associated with climate change, such as increased flooding, severe storms, or property devaluation.
As of September 2025, the agencies have officially rescinded that guidance, stating that existing safety-and-soundness standards already require banks to identify and manage all material risks without the need for climate-specific direction.
Regulators made clear that banks already have strong frameworks for risk identification and mitigation, including policies covering flood zone determinations, insurance tracking, and lender-placed coverage. The agencies expressed concern that layering new climate-specific principles could “distract from the management of other potential risks” that banks face daily.
For lenders, this rescission signals a return to familiar territory, focusing on existing regulatory requirements rather than speculative or overlapping standards.
While the climate-risk principles are gone, flood compliance remains non-negotiable. Under the National Flood Insurance Act, banks and servicers must ensure that properties securing loans in Special Flood Hazard Areas (SFHAs) carry adequate flood insurance coverage for the life of the loan.
Key requirements remain unchanged:
These long-standing obligations are the cornerstone of a lender’s risk-management program, helping safeguard both the borrower’s property and the institution’s collateral.
Even without the now-rescinded climate guidance, examiners continue to expect lenders to have robust insurance-tracking programs. Accurate, real-time tracking ensures that every property in the portfolio maintains compliant coverage levels and helps prevent costly lapses that could expose the institution to loss or enforcement action.
Institutions that partner with companies like AFR Services to implement automated solutions for policy monitoring, renewal alerts, and data reconciliation can significantly reduce manual errors and demonstrate proactive compliance, a critical factor during FDIC, OCC, or Federal Reserve examinations. These technology-driven programs help lenders maintain continuous coverage visibility, streamline workflows, and document compliance with confidence.
The rescission does not change the rules around lender-placed insurance. When a borrower’s policy expires, lenders must act quickly to protect the collateral by placing coverage on the property. Proper documentation, including borrower notifications, premium disclosures, and coverage verification, is still required to meet FEMA and regulatory standards.
Institutions should view lender-placement not simply as a compliance function, but as part of a broader risk-management continuum, ensuring that every property remains protected even when borrower engagement fails.
The OCC, FDIC, and Federal Reserve may have stepped back from climate-specific guidance, but the expectation for comprehensive flood-risk management has not changed.
For lenders, this is an opportunity to:
At the end of the day, sound flood-risk management remains one of the most effective ways to protect borrowers, preserve portfolio quality, and satisfy examiners, no new climate framework required.
AFR Services partners with lenders nationwide to simplify insurance-risk compliance. From flood-zone determinations and policy tracking to lender-placed insurance solutions, we help financial institutions stay audit-ready and protected.