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 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. The OCC’s effort was initiated after Republican lawmakers complained about banks declining to finance energy projects, citing climate-change concerns. Lenders including Citigroup and Bank of America have also limited ties to the gun industry.
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 the 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 of 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.