Days before the end of the current government, a US banking regulator finalized a rule that large American banks cannot deny loans to oil and gas companies.
The Comptroller of the Currency (OCC) on Thursday released its finalized rule to guarantee so-called fair access to banking services, according to which “banks must carry out risk assessments of individual customers, rather than making broad decisions that affect all categories or classes of customers, by providing access to services, capital and credit. “
Banks are increasingly aware of the consequences for the reputation of lending to oil and gas projects in sensitive areas like the Arctic, for example. In the United States, Goldman Sachs said in December 2019 that it would refuse to finance new Arctic oil exploration and production and the development of a new thermal coal mine or open pit mining. Wells Fargo, JPMorgan and Deutsche Bank also said they would stop funding new oil and gas projects in the Arctic.
The rule, which is due to take effect on April 1, 2021, should apply to the largest banks with more than $ 100 billion in assets.
The largest US banks, however, criticized the rule during the comment period that ended last week, saying the new rule “also appears to prohibit banks from using subjective judgments and qualitative considerations, including reputation risk, when deciding whether provide a financial service, which is totally inconsistent with how the OCC has historically expected banks to make risk management decisions. ”
Related: Saudi Arabia starts new Middle East oil bull race
Commenting on the finalized rule, Greg Baer, president and CEO of the Bank Policy Institute (BPI), a research and defense group for major U.S. banks, said On thursday:
“The rule lacks logic and a legal basis, ignores basic facts about the functioning of the banking system and undermines the safety and soundness of the banks to which it applies.”
Biden’s new administration has a number of ways to prevent the rule from taking effect, comments The Hill, including through a Congressional review action or a delay in applying the new interim controller rule that President-elect Joe Biden is likely to name next time. week, while his nominee for the role is confirmed by the Senate.
By Charles Kennedy for Oilprice.com
More top readings from Oilprice.com: