OCC finalizes rule punishing banks that cut service to certain sectors

WASHINGTON — The Office of the Comptroller of the Currency finalized a rulemaking Thursday morning opposed by the industry that forces the largest banks to provide services to gun businesses and other controversial sectors if those businesses meet certain financial criteria.

Largely unchanged from the November proposal, the final rule will require banks with more than $100 billion of assets to do business with firearm manufacturers, energy companies and other polarizing industries if they meet “quantitative, impartial, risk-based standards,” according to the regulation.

The rule, set to go into effect in April 2021, was finalized just 10 days after its public comment period closed on Jan. 4 and only 55 days since first being proposed — a breakneck regulatory pace by any measure.

While some unpopular industries and their advocates have cheered the OCC’s “fair access” proposal, banks have blasted the rule and its premise — that depository institutions have turned away certain sectors en masse for “political reasons” — for being arbitrary, capricious and having dubious legal backing.

The OCC noted that it had received more than 35,000 comments; 4,200 comments in support of the proposal, and 31,290 opposed. ("This figure includes approximately 28,000 form letters collected by a single organization," the OCC wrote in a footnote of the rule.)

Bloomberg News

The rule, issued on acting Comptroller Brian Brooks's last day at the agency, will likely be examined by a future comptroller appointed by the incoming Biden administration. Congressional Democrats might also seek to overturn the regulation through authority in the Congressional Review Act to repeal rules if lawmakers pass a resolution within a statutory time frame.

“We are disappointed the acting comptroller chose to fast-track the final approval of this hastily conceived and poorly constructed rule on his last day in office,” Greg Baer, CEO of the Bank Policy Institute, said in a press release. “The rule lacks both logic and legal basis, it ignores basic facts about how banking works, and it will undermine the safety and soundness of the banks to which it applies.”

Brooks said in a statement that the rule would codify years of OCC guidance.

"When a large bank decides to cut off access to charities or even embassies serving dangerous parts of the world or companies conducting legal businesses in the United States that support local jobs and the national economy, they need to show their work and the legitimate business reasons for doing so," said Brooks, who announced his intention to leave the agency the night before.

"As comptrollers and staff in previous administrations have made clear in speeches, guidance, and testimony, banks should not terminate services to entire categories of customers without conducting individual risk assessments,” Brooks said.