Banks opposing rule forcing them to serve oil, gun firms
Wall Street banks are asking a key regulator to drop a proposed rule that would force them to do business with energy and firearms companies that could subject them to public scorn, questioning the legal basis for a measure they say is being unfairly fast-tracked.
The “fair access” rule proposed by the Office of the Comptroller of the Currency on Nov. 20 would create undue burdens for lenders and could threaten their business models, banking industry groups said in comment letters to the agency. The industry groups also challenged OCC’s authority to issue the rule and argued that the 45-day comment period that ended last week gave them insufficient time to respond.
Brian Brooks, the OCC’s interim chief, wants to bar banks from refusing to serve legal businesses — such as those in the oil, prison and firearms industries — that they might otherwise avoid because of the potential for reputational harm. Under the rule, a bank must conduct a risk assessment on any prospective customer and can’t refuse the business so long as the numbers are sound.
The OCC’s effort was initiated after Republican lawmakers complained about banks declining to finance energy projects, citing climate change concerns. Lenders including Citigroup Inc. and Bank of America Corp. have also limited ties to the gun industry.
The opening salvo in the debate was Operation Choke Point, an effort by the Obama- era Justice Department to stymie money laundering in industries it saw as particularly risky — including payday lenders, firearms dealers and escort services. The program sparked criticism from Republican lawmakers, including Senate Banking Committee Chairman Mike Crapo, R-Idaho, who backs the OCC’s new push.
Brooks, who has been nominated by President Donald Trump for a full term as comptroller, is facing time pressure to finish the rule because he could be replaced after President- elect Joe Biden takes office Jan. 20.
“The proposal’s fundamental practical problems are compounded by its basic legal deficiencies,” the Bank Policy Institute said in its letter. It would “effectively replace the traditional business of American banking” by dumping a company’s risk management decisions for a system in which the regulator dictates “to whom financial services must be provided.”
The proposal drew thousands of comment letters, many from people supporting its requirement that big banks open their doors to firearms businesses.
Consumer groups and Democratic lawmakers joined lenders in criticizing the rule, focusing more on climate change issue than on banks’ business models.