Houston Chronicle

Banks blast rule thatwould force lending to oil, gun firms

- By Jesse Hamilton

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 Monday 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, a controvers­ial 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, 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 firm’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 of them 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.

“This proposed rule directly undermines the OCC’s responsibi­lity to ensure a safe and sound banking sector,” said Senator Brian Schatz (D-Hawaii), who co-signed a comment letter with a group of congressio­nal Democrats. “It is extremely troubling that a federal regulator is using its supervisor­y authority to pressure banks to finance projects the banks themselves have deemed too risky.”

Bankers also questioned OCC’s reliance on Dodd-Frank Act language directing the agency to ensure “fair access to financial services” as a basis for the rule. It “strains credulity” to anchor a “significan­t, burdensome and novel rule” on that clause, the American Bankers Associatio­n said in its letter.

“We are considerin­g all of the stakeholde­rs comments as we prepare a final rule,” said Bryan Hubbard, an OCC spokesman.

 ?? Hector Retamal / AFP via Getty Images ?? Lenders including Citigroup Inc. and Bank of America Corp. have limited ties to the gun industry and some energy projects.
Hector Retamal / AFP via Getty Images Lenders including Citigroup Inc. and Bank of America Corp. have limited ties to the gun industry and some energy projects.

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