A pedestrian passes the Currency Controller’s Office (OCC) stamp displayed outside the organization’s headquarters in Washington, DC, USA, on Wednesday, March 20, 2019.
Andrew Harrer | Bloomberg | Getty Images
The Currency Controller’s Office announced that it has stopped publishing the fair access rule to financial services, a move it said will allow the next confirmed currency controller to review the final rule and public comments that it receive the OCC.
The rule would subject larger banks to examination when they deny services to any customer based on risk factors that cannot be quantified, such as some environmental, social, and governance risks, as well as reputational risks.
Critics, from commercial banking groups to ESG investors and legal academics, said at the time of the end of the rule earlier this month that it was rushed, poorly motivated, poorly written and could be subject to legal challenges. and congressionals.
Approximately 35,000 public comments in response to the rule arrived before the January 4 deadline. The standard was proposed in November and the deadline for the comment deadline was much shorter than the standard 60 to 90 days. The regulator, which must review all public comments before the rules are finalized, issued it eight business days after that deadline.
“The OCC’s long-standing supervisory guidelines state that banks should avoid terminating large categories of customers without assessing the individual risk of customers,” it said in a statement on Thursday. “The decision to stop the publication of the rule was an independent decision of the OCC.”
Some conservative think tanks and segments of industries that feel threatened by problems over which banks have increasingly denied services, including lending, such as energy, arms manufacturing and agriculture, gave rule support. Critics have referred to this as the “rule of arms manufacturers and oil drillers,” although voices voicing their support were more widespread, including, for example, concerned agricultural interests because activists of animal rights could go to the banks that provided them. Cryptocurrency projects, marijuana companies, sex workers and other niches also felt threatened and found support from groups such as the Electronic Frontier Foundation, which referred to the standard’s goal as “ending financial censorship.” “.
An OCC spokesman previously told CNBC that many critics are confused that the rule prohibits banks from leaving the service and lending to risky businesses. “This is not correct. The proposal requires large banks to show their work and conduct objective risk assessments of individual customers regarding the provision of services in accordance with previous guidelines issued by the Office of the Comptroller of the Currency.” .
The rule applies to larger banks with more than $ 100 billion in assets that “can exert significant price power or influence sectors of the national economy.”
The standard requires covered banks to make products and services available to all customers in the communities they serve, based on consideration of quantitative, impartial, and risk-based standards set by the bank. .
Opposition from commercial banking groups has been consistent since the rule was first proposed and then finalized.
“We are disappointed that the acting Comptroller has decided to expedite the final approval of this conceived and poorly constructed rule on his last day in office. The rule has no logical or legal basis, ignores the basic facts about the operation of banking and it will harm the security and soundness of the banks to which it applies, ”Bank Policy Institute president and CEO Greg Baer, who represents the largest banks, said in a statement earlier this month. “Its substantial problems are only offset by the serious procedural failures of the rules decision-making process, and for these reasons it is unlikely to withstand scrutiny.”
The American Bankers Association, which represents the broader banking industry, was concerned about the risk of a broader interpretation being applied to all banks and called the rule “arbitrary and capricious” in a comment letter to the OCC filed last month and said it lacked “clear legal authority, its inconsistency and potential conflict with long-standing and widely accepted supervisory and risk management practice.”
ESG investors were just as tough.
“This standard says that banks should not engage in risk assessment. This is what banks do every day,” said Steve Rothstein, head of Ceres’ Sustainable Capital Markets Accelerator, a advocacy group for investment in sustainability. “Those who do well have healthy loans and we clearly see a trend towards greater awareness and commitment to ESG,” he told CNBC earlier this month. “You couldn’t say it’s not a line of business you want to be on. It’s a last-ditch attempt. The broader issue of how we measure risk, quantify climate risk, is important, but that particular rule is a distraction.” .