House Financial Services Committee Urges OCC to Rescind Proposed "Fair Access to Financial Services" Rulemaking
Commentary by Steven Lofchie
House Financial Services Committee Chair Maxine Waters and 22 other Committee members urged Acting Comptroller of the Currency Brian Brooks to withdraw the OCC "fair access to financial services" Notice of Proposed Rulemaking. As previously covered, the proposal would require, among other things, that each OCC-regulated U.S. bank with at least $100 billion in total assets offers its financial services (including financial products) on "proportionally equal terms" to all individuals and businesses in the geographic location it serves.
The representatives characterized the proposal as "misguided" as it would not protect, but rather would "undermine," the safety and soundness of the banking system by:
- requiring banks to service the fossil fuel industry with "risky and complicated" products;
- undercutting regulatory efforts to address climate change by guaranteeing the fossil fuel industry access to any financial service; and
- discounting a financial institution's choice to adopt a decision-making framework intended to reduce gun violence through the proposal's quantitative-only risk analysis.
Though the representatives urged a withdrawal of the proposal, they also recommended that the OCC extend the comment period due to the COVID-19 pandemic. In addition, they argued that the OCC should use its authority to combat systemic climate risks, promote corporate social responsibility, and ensure that minority consumers, minority-owned businesses, and communities of color receive fair access to banking services.
Further, in response to the OCC's distinction between anti-discrimination principles and the concept of "fair access" in the proposal, the representatives said: "the well-documented pattern of systemic discrimination in depriving communities of color of equal access to credit bears no resemblance to financial institutions taking actions to reduce their exposure to climate risk . . . and we find it offensive to make any comparison in that manner." The representatives expressed concern that financial institutions could not "make use" of environmental, social, and governance ("ESG") ratings, which include qualitative considerations.
Commentary
In the letter, the representatives state that "the rulemaking appears designed to force banks to ignore material risks posed by fossil energy companies . . . while providing them access to any banking product or service they want." Should banking regulators affirmatively discourage banks from providing financial services to the U.S. energy industry? Does that seem like an effective way to combat climate change?
Notably, the OCC's proposed rule is also disfavored by the banking industry. See, e.g., Comment of the Bank Policy Institute. The Policy Institute's argument, however, is based on the proposed rule impeding banks' ability to exercise independent business judgment (and to make money).
Given the upcoming change in the presidential administration, this rule proposal is not going anywhere.
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