WASHINGTON — Acting Comptroller of the Currency Brian Brooks took an extraordinary step for a bank regulator Monday, calling on states and municipalities to end “essentially indefinite” shutdown orders that were put in place to limit the spread of the coronavirus.
Brooks, who has only been on the job since Friday, said protracted stay-at-home policies pose risks to the economy that must be weighed against the benefits. He noted more specifically of potential fallout for banks, such as declining commercial real estate values, and even “the very real risk of increases in bank robberies” because of a proliferation of face masks.
"Your members should consider these risks carefully and weigh them against the scope and duration of continued lockdown orders in making your decisions, because certain aspects of these orders potentially threaten the stability and orderly functioning of the financial system the OCC is charged by law to protect," Brooks said in a letter to the the National League of Cities, the U.S. Conference of Mayors and the National Association of Governors.
Brooks was the first federal bank regulator to wade into the debate over the pace of reopening that has largely pitted business advocates against public health experts. The latter have pleaded for caution in easing stay-at-home policies amid the risk of additional waves of coronavirus outbreaks. But bank trade groups have largely stayed on the sidelines of the debate as well.
The acting comptroller said banks involved in commercial real estate must contend with the risk of “lengthy property vacancies that result from extended stay-at-home orders,” which, Brooks said, could lead to a spike in burglary and vandalism.
He argued that the loss of typical business revenue from local lockdowns would make it much more difficult for banks to make loans, particularly if the lockdowns stretched on indefinitely. “Banks lend to customers based in part on their assessment of customers’ current and expected future income, which largely determine their ability to repay the debt,” Brooks wrote.
If delinquency rates began a rapid ascent, he continued, it would “threaten the community and mid-size banks that are the economic lifeblood of local communities, a factor that your members should take into account in weighing the risks and benefits of lengthy continued lockdown orders.”
The letter did not acknowledge the potential health risks of re-opening businesses before local officials have contained the spread of the coronavirus, which many experts have warned could lead to a second wave of infections and deaths within months and the economy being re-shuttered.
Citing news reports, he criticized “certain cities” that had turned off the utilities of businesses that operated in defiance of lockdown orders, saying that such an act could “impair their condition, structural integrity, and value, thus impairing the collateral that secures real estate loans.”
"While some cities and states are reopening their economies, others reportedly are extending their lockdown orders for weeks or even months," Brooks said. "Such essentially indefinite requirements that businesses remain closed increases other risks to properties securing bank loans."