Days before the end of the current Administration, a regulator of the US banking industry finalized a rule that large US banks cannot deny loans to oil and gas companies.
The Office of the Comptroller of the Currency (OCC) on Thursday released its finalized rule to ensure so-called fair access to banking services, according to which “banks should conduct a risk assessment of individual customers, rather than taking powerful decisions that affect categories or classes of customers, when access to services, capital, and credit is provided. “
Banks are increasingly aware of the reputational consequences of providing loans to oil and gas projects in sensitive areas such as the Arctic, for example. In the United States, Goldman Sachs said in December 2019 that it would refuse to fund new Arctic oil exploration and production and the development of new coal-fired thermal mines or bar mining. Wells Fargo, JPMorgan and Deutsche Bank have also said they will stop funding new oil and gas projects in the Arctic.
The rule, which is expected to take effect on April 1, 2021, will apply to larger banks with more than $ 100 billion in assets.
The largest banks in the United States, however, have criticized the rule during the comment period that ended last week, saying the new rule “would also seem to prohibit banks from using subjective criteria and qualitative considerations, including risk reputational, when deciding whether to offer financial service, which is totally incompatible with the way the OCC has historically expected banks to make risk management decisions ”.
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Commenting on the final rule, Greg Baer, president and CEO of the Bank Policy Institute (BPI), a research and advocacy group for major US banks, dit Thursday:
“The rule has no logical or legal basis, ignores the basic facts about the operation of the bank and will undermine the security and soundness of the banks to which it applies.”
The incoming Biden administration has several ways to prevent the rule from coming into force, The Hill says, including a congressional review action or a delay in enforcing the new auditor rule that President-elect Joe Biden will call probably next week while the candidate for the role is confirmed by the Senate.
By Charles Kennedy for Oilprice.com
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