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Days before the end of the current administration, a US banking regulator finalized a rule under which major US banks cannot refuse to lend money to oil and gas companies.
The Office of the Comptroller of the Currency (OCC) on Thursday released its final rule to ensure so-called fair access to banking services, under which “banks should assess the risks of individual customers, rather than make decisions general affecting all categories or classes of customers, when providing access to services, capital and credit. “
Banks are 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 exploration and production of oil in the Arctic and the development of new thermal or surface coal mines. Wells Fargo, JPMorgan and Deutsche Bank have also said they will stop funding new arctic oil and gas projects.
The rule, which is expected to take effect on April 1, 2021, is expected to apply to the largest banks with more than $ 100 billion in assets.
However, the largest U.S. banks criticized the rule during the comment period that ended last week, saying the new rule “would also appear to prohibit banks from using subjective judgment and qualitative considerations, including including reputational risk, in deciding whether or not to provide a financial service, which is totally incompatible with the way the BCC has always expected banks to make risk management decisions. “
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Commenting on the finalized rule, Greg Baer, ​​president and CEO of the Bank Policy Institute (BPI), a research and advocacy group for major US banks, said Thursday:
“The rule lacks both logic and legal basis, it ignores the basic facts about how banks work, and it will compromise the safety and soundness of the banks to which it applies.”
Biden’s incoming administration has several ways to prevent the rule from taking effect, comments The Hill, including through congressional review action or a delay in enforcing the rule of the new interim comptroller that President-elect Joe Biden will likely appoint next week while his candidate for the post is confirmed by the Senate.
By Charles Kennedy for Oil chauffage
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