US watchdog: big US banks can’t afford any long money for oil and gas

Before the end of the current administration, a US banking industry regulator finalized a rule under which large US banks cannot refuse loans to oil and gas companies.

The Office of the Comptroller of the Currency (OCC) on Thursday released its final rule to ensure proper access to banking services, under which “banks should conduct a risk assessment of individual customers, not broad-based ones that affect the entire base” To make decision based. Categories or classes of customers, when there is a provision of access to services, capital and credit. “

For example, banks have become increasingly aware of the prestigious results of lending to oil and gas projects in sensitive areas such as the Arctic. In the United States, Goldman Sachs said in December 2019 that it would reduce the exploration and production of new Arctic oil and to finance new thermal coal mine development or strip mining. Wells Fargo, JP Morgan and Deutsche Bank have also said they will stop financing new oil and gas projects in the Arctic.

The rule, expected to take effect on April 1, 2021, is scheduled to apply to the largest banks with assets of more than $ 100 billion.

However, the largest US banks criticized the rule during the comment period ended last week, stating that the new rule would “prohibit banks from using subjective judgment and qualitative considerations, including reputational risk,” a decision. In deciding what to provide financial services, which is completely inconsistent with how the OCC has historically expected banks to take risk management decisions. “

Related: Saudi Arabia Launches New Bull Run in Middle East Oil

Commenting on the final rule, Greg Bayer, president and CEO of the Bank Policy Institute (BPI), a research and advocacy group for large US banks, said on Thursday:

“The rule lacks both logic and legal basis, it ignores the basic facts of how banking works, and will undermine the security and soundness of the banks to which it applies.”

The incoming Biden administration has several ways to prevent the rule from going into effect, including Hill Comments, which delays implementing a rule from Congressional review action or a new acting comptroller that President-Elect Joe Biden will name next week, Nominees for the role are confirmed by the Senate.

By Charles Kennedy for

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