Environmental Policies Don't Grow Overnight. EBA Can Help!
Why Environmental Policy Development is Important
With the heightened scrutiny from regulatory agencies, which include the SEC, FDIC, OCC, and SBA, along with competitive pressure to approve deals, environmental risk is still the last issue to evaluate when approving commercial real estate transactions. This is despite environmental contamination identified by the Office of the Comptroller Currency (OCC) as a critical risk factor that “may negatively affect the value of real property collateral as well as create potential liability for the bank under various environmental laws.” Financial regulatory agencies issued guidelines and requirements for banks and publicly traded corporations to follow in establishing an environmental risk policy, and disclosing known environmental liabilities. Consequently, establishing an effective risk policy is critical to meet regulatory requirements for your organization.
What You Can Do
When establishing or updating an environmental risk policy for your organization, specific factors to consider include:
- Confirm support from the senior credit risk officer and senior management to enforce the policy;
- Develop a policy that mirrors your bank’s risk tolerance level;
- Identify the collateral and loan types that are subject to the policy, and policy exemptions or exclusions;
- Clarify who has the authority to enforce the policy and waive requirements;
- Create a tiered approach to environmental due diligence applying industry accepted practices such as transaction screen or Phase I environmental site assessments;
- Develop a list of pre-approved environmental consultants.
How the EBA Can Help
If you need help on these matters as well as policy guidance and technical support from environmental risk managers experiencing the same challenges you face, joining the EBA is the right choice for your organization. The EBA will give you access to a generic environmental risk policy and tip sheet, as well as the opportunity to meet with environmental risk managers from financial institutions throughout the U.S. footprint.
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