Federal banking regulators warned that California’s new climate disclosure mandates could clash with federal law and disrupt basic banking services for Californians.
Story Snapshot
- The Office of the Comptroller of the Currency asked California to exempt federally chartered banks from two climate laws.
- State rules target large companies doing business in California and require emissions and climate-risk reports.
- Regulators say the rules could conflict with federal standards and drain resources from core banking needs.
- California continues implementing the emissions law while climate-risk rules face litigation delays.
What the federal regulator told California
The Office of the Comptroller of the Currency (OCC) sent a formal letter on October 29, 2026, urging the California Air Resources Board to exempt national banks and federal savings associations from two climate disclosure laws, Senate Bill 253 and Senate Bill 261. The OCC said the state mandates could conflict with federal banking law and raise constitutional concerns. The letter asked California to clarify that federally chartered banks are not required to comply with the state’s reporting rules.
Senate Bill 253 requires large companies to disclose their greenhouse gas emissions each year, including emissions across supply chains. Senate Bill 261 requires large companies to report climate-related financial risks every two years. Both laws apply to companies over set revenue thresholds that do business in California. The OCC said these thresholds could pull many banks into the programs, even though banks already face federal oversight and safety-and-soundness rules.
How California defines who must report
The California Air Resources Board describes Senate Bill 253 as covering business entities formed under U.S. law with more than one billion dollars in annual revenue that do business in the state. Covered companies must disclose Scope 1, Scope 2, and Scope 3 emissions. The agency’s guidance says each company must judge its own status under the law. The agency materials do not list a special carve-out for national banks or federal savings associations.
California is moving ahead with emissions reporting under Senate Bill 253, but it has paused further steps on Senate Bill 261 due to ongoing litigation. That split adds to confusion for companies that may need to build systems now while parts of the program remain in flux. The OCC flagged this uncertainty and warned that unclear lines could force banks to divert staff and money from serving customers to meeting evolving rules.
Why the OCC says federal law could preempt the state rules
The OCC argues that federal banking law can override state rules when they prevent or significantly interfere with national bank powers. That standard comes from Supreme Court precedent and is used in banking law. The OCC said California’s climate reporting could conflict with federal supervision, confidentiality limits, and risk management expectations. The agency also warned of burdens on smaller banks that lack large compliance teams.
Federal preemption fights are common in the dual-banking system. States set broad rules for businesses, while federal regulators guard uniform standards for national banks. The OCC keeps a record of preemption decisions and frames this as a long-standing part of banking oversight, not a new push. The California clash fits that pattern: a state program of general application meets federal rules built for safety and soundness in finance.
What this could mean for customers and communities
The OCC letter raises real-world risks that cross political lines: higher costs, fewer services, or slower credit if banks must add complex reporting on top of federal duties. The American Bankers Association told the state in 2025 that dozens of banks could be covered and asked for flexibility on thresholds and timing. That comment supports concerns about cost and scale, though it did not demand a total bank exemption.
The @USOCC is committed to ensuring its regulated institutions can engage in the business of banking and provide fair access to financial services without improper interference of state laws. The application of two California climate disclosure laws to national banks and federal… pic.twitter.com/Hj8cJg6Cs3
— OCC (@USOCC) October 30, 2026
There is no court ruling yet on whether California can force national banks to comply. There is also no public record naming a bank that plans to leave California because of these rules. For now, the facts are narrower and more urgent: the state’s emissions law is moving forward, climate-risk rules are paused, and federal regulators want clarity before banks spend heavily on new systems they may not need.
What to watch next
Watch for a formal response from the California Air Resources Board on whether national banks must comply. Track the litigation over Senate Bill 261 and any court filings that test preemption directly. Look for draft rules or guidance that define how financial firms should measure supply-chain emissions. Finally, scan bank disclosures and earnings calls for signs of rising compliance costs or changes in California lending footprints tied to these laws.
Sources:
occ.gov, ww2.arb.ca.gov, kpmg.com
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