Days before the end of the current government, a US regulator in the banking industry finalized a rule under which large US banks could not deny lending money to oil and gas companies.
The Office of the Currency Controller (OCC) on Thursday announced its final rule to ensure so-called fair access to banking services, under which banks must conduct a risk assessment of individual customers, rather than making broad decisions that cover entire categories or classes customers, when they provide access to services, capital and credit. ”
Banks are becoming increasingly aware of the reputational consequences of lending 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 new development of thermal coal mining or strip mining. Wells Fargo, JPMorgan and Deutsche Bank have also said they will no longer finance oil and gas projects in the Arctic.
The rule, which is expected to take effect on April 1, 2021, applies to the largest banks with assets of more than $ 100 billion.
However, the largest US banks criticized the criticism during the comment period ending last week, saying that the new rule “apparently also prohibits banks from using subjective judgment and qualitative considerations, including reputational risk, to decide whether they are a financial service. , which is completely at odds with the way the OCC has historically expected banks to make risk management decisions. ”
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Regarding the final rule, Greg Baer, President and CEO of the Bank Policy Institute (BPI), a research and advocacy group for major US banks, said. said on Thursday:
“The rule does not have a logical and legal basis, it ignores basic facts about how banking works, and it will undermine the security and reliability of the banks to which it applies.”
The incoming Biden administration has several ways to stop the rule from coming into effect, The Hill says, including through a congressional review action or a delay in enforcing the rule of the new acting warden who elected President Joe Biden is likely to name next week while his nominee for the role is confirmed by the Senate.
By Charles Kennedy for Oilprice.com
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