WASHINGTON — For years Republicans have criticized banks and the Obama administration for appearing to pick sides on hot-button issues such as gun violence and climate change, saying it is not a financial institution's place to deny services to politically sensitive sectors.
The Office of the Comptroller of the Currency took that criticism to a new level Friday, proposing a "fair access" standard for banks over $100 billion of assets that requires them to cater to any business that meets objective, quantitative criteria for receiving services.
The proposal says banks effectively should be blind to any political or social-justice implications of serving one industry over another, and should instead just focus on the numbers.
"Neither the OCC nor banks are well-equipped to balance risks unrelated to financial exposures and the operations required to deliver financial services," the agency wrote in the proposal. "For example, climate change is a real risk, but so is the risk of foreign wars caused in part by U.S. energy dependence and the risk of blackouts caused by energy shortages."
The new framework, unveiled in the final months of the Trump administration, is consistent with the GOP repudiations of
In March 2018, Citigroup announced it would restrict business with certain firearms companies, and in April of that year, Bank of America said it would stop lending to companies that designed military-style guns for nonmilitary use. Similarly, some companies such as
The OCC's plan also follows outrage by conservatives over the Obama administration's Operation Choke Point. The Justice Department initiative, which ended during the Trump administration, intended to sharpen banks’ attention to risks of fraud and money-laundering. But banks claimed it compelled them to cut ties with legal but high-risk industries such as payday lenders.
It is unclear whether the OCC, currently led by acting Comptroller of the Currency Brian Brooks, will be able to finalize the regulation. Some banks that see wading into social issues as a reputational priority may object to the proposed limitations. And while
On a call with reporters, Brooks argued that the proposal was "broadly bipartisan" because it forces banks to serve businesses with support from both the left and right.
"We're not just talking about calls to ban firearms manufacturers or calls to de-bank fracking companies," Brooks said. "We're talking about calls to de-bank independent ATM operators, calls to de-bank Planned Parenthood and other family planning organizations, calls to de-bank agricultural operations. These things are not politically partisan.”
The heart of the proposed rule would require that banks subject to the rule make every financial service they offer in a given geographic market — whether lending, payment processing or basic checking accounts — available to all persons “on proportionally equal terms.”
In order to justify denying access to services, a bank must rely on a person’s “quantified and documented failure to meet quantitative, impartial risk-based standards established in advance by the covered bank,” the agency said.
In addition, the OCC’s proposed rule would formally ban banks from denying service to one type of firm or sector to the advantage of another. Brooks used the example of a bank hypothetically denying services to an oil company because it “want[ed] to give an advantage to wind farms or solar companies,” he said.
Even though the rule would be limited to banks with over $100 billion of assets, the proposal also seeks comments about whether the OCC should consider a secondary threshold based on bank's national market share in a given area.
“For a covered bank’s board and its management to carry out their core risk management responsibilities, the rule would require that a covered bank provide fair access to its financial services with relevant risks quantified and managed, including through pricing, as needed,” the proposal says. “The covered bank’s board and management would ultimately be responsible for ensuring that the bank’s operations are consistent with its obligation to provide fair access to financial services.”
As background, the proposed rulemaking cites news reports in which banks ended business relationships with private prison facilities and firearm manufacturers.
“It is our understanding that some banks have taken these actions based on criteria unrelated to safe and sound banking practices,” the agency said.
The OCC further claimed that some bank decisions to decline services stemmed from “personal beliefs and opinions on matters of substantive policy that are more appropriately the purview of state and Federal legislatures."
“The OCC believes these criteria are not, and cannot serve as, a legitimate basis for refusing to grant a person or entity access to financial services,” the agency wrote.
