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.<\/p>\n
The \u201cfair access\u201d 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\u2019s authority to issue the rule and argued that the 45-day comment period that ended Monday gave them insufficient time to respond.<\/p>\n
Brian Brooks, the OCC\u2019s 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\u2019s 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.<\/p>\n
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.<\/p>\n
\u201cThe proposal\u2019s fundamental practical problems are compounded by its basic legal deficiencies,\u201d the Bank Policy Institute said in its letter. It would \u201ceffectively replace the traditional business of American banking\u201d by dumping a firm\u2019s risk-management decisions for a system in which the regulator dictates \u201cto whom financial services must be provided.\u201d<\/p>\n
The proposal drew thousands of comment letters, many of them from people supporting its requirement that big banks open their doors to firearms businesses.<\/p>\n
Consumer groups and Democratic lawmakers joined lenders in criticizing the rule, focusing more on climate change issue than on banks\u2019 business models.<\/p>\n
\u201cThis proposed rule directly undermines the OCC\u2019s responsibility to ensure a safe and sound banking sector,\u201d said Senator Brian Schatz of Hawaii, who co-signed a comment letter with a group of congressional Democrats. \u201cIt 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.\u201d<\/p>\n
Bankers also questioned OCC\u2019s reliance on Dodd-Frank Act language directing the agency to ensure \u201cfair access to financial services\u201d as a basis for the rule. It \u201cstrains credulity\u201d to anchor a \u201csignificant, burdensome, and novel rule\u201d on that clause, the American Bankers Association said in its letter.<\/p>\n
\u201cWe are considering all of the stakeholders comments as we prepare a final rule,\u201d said Bryan Hubbard, an OCC spokesman.<\/p>\n