In an effort to emphasize the importance of some of the general lessons highlighted by events over the past two years and to advance the application of these lessons in the interests of avoiding future difficulties in other areas, the Federal Reserve issued its supervisory letter on counterparty credit risk management on February 1 of this year to provide general guidance.
E&S risks arising from the health crisis offers a glimpse of how severe and longlasting other potentially systemic risks such as climate change may drag the banks’ performance and long-term growth. The pandemic has features akin to climate and other environment-related risks. It requires science-based data and have underlying physical and transition risks.