OCC Stops Bank Rule Offending Wall Street, Climate Investors

A pedestrian crosses the seal of the Office of the Comptroller of the Currency (OCC) displayed outside the organization’s headquarters in Washington, DC, US on Wednesday, March 20, 2019.

Andrew Harrer | Bloomberg Getty Images

The Comptroller’s Office of the Currency announced that it had halted the publication of its Fair Access to Financial Services rule, a move that said it would allow the next confirmed Comptroller of the Currency to review the final rule and public comments that OCC was received.

The rule will examine the largest banks when they deny services to any customer based on risk factors that cannot be determined with certain environmental, social and governance risks as well as reputational risks.

Banking trade groups to ESG investors and legal scholars said earlier this month at the time of the rule’s finalization that it was in a hurry, poorly argued, poorly written, and could be subject to legal and congressional challenges is.

Approximately 35,000 public comments came in response to the rule within the January 4 deadline. The rule was proposed in November and the comment deadline was much shorter than the 60 to 90-day standard. The regulator, which is required to review all public comments before the rules are finalized, released it eight business days after that deadline.

“The OCC’s long-term supervisory guidance said banks should avoid eliminating broad categories of customers.” The decision to stop the publication of the rule was an independent decision by the OCC, it said in a statement on Thursday.

Some conservative think tanks and segments of industries find that issues on which banks have refused to give loans, such as those threatened by services such as energy, arms manufacturing and agriculture – have supported the rule. Critics refer to this as the “gunmakers and oil drillers rule”, although voices expressing support were more widespread, for example agricultural interests worried that animal rights activists might target banks that lend to them . Cryptocurrency projects, marijuana businesses, sex workers and other niches also felt threatened and received support from groups such as the Electronic Frontier Foundation, which called the rule’s goal “financial censorship”.

An OCC spokesperson previously told CNBC that many critics misunderstand the rule that banks are prohibited from discontinuing service and lending to risky businesses. “This is incorrect. The proposal requires large banks to show their work and conduct objective risk assessments of individual customers regarding the provision of services in line with previous guidance issued by the Office of the Comptroller of the Currency.”

The rule applies to the largest banks with assets in excess of $ 100 billion that can “increase significant pricing power or influence in areas of the national economy.”

The rule requires covered banks to provide products and services available to all customers, based on the consideration of quantitative, unbiased, risk-based standards established by the bank.

Opposition to bank business groups continued unabated ever since the rule was first proposed and finalized.

“We are disappointed that the caretaker controller has elected to give his final day in office the final approval of this hastily made and poorly constructed rule. This rule lacks both logic and legal basis. Ignores the basic facts about banking operations and this will undermine the security and soundness of banks, ”said Greg Bayer, president and CEO of the Bank Policy Institute, a statement earlier this month. The rules transcend serious procedural failures, and for these reasons it is unlikely to face scrutiny. “

The American Bankers Association, which represents the broader banking industry, was concerned about the risk of a broader interpretation that would apply to all banks, and in a comment letter sent to the OCC last month called the rule “arbitrary and graceful”, and Said they lack “clear statutory authority, its inconsistencies and potential conflicts with long-term widely accepted risk management and supervision practice.”

ESG investors were harsh.

“This rule states that banks should not be in the business of assessing risk. This is what banks do every day,” said Ceres Accelerator Head for Sustainable Capital Markets, Steve Rothstein, a sustainability investment advocacy group. CNBC reported earlier this month, “People who take healthy loans, and we are clearly seeing trends for greater awareness and engagement with ESG.” “You can’t just say that this is not a line of business you do. It’s an outrageous last-ditch effort. The broader issue of how we measure risk, measure climate risk, is an important one, But this particular rule is a distraction. “


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