Big banks are no longer allowed to reject applicants for business loans because of the industry in which they operate, according to a new rule finalized by the Trump administration on Thursday.
Why is this important: Wall Street has reduced its exposure to industries such as guns, oil and private prisons, under pressure from the public and shareholders. This new rule could reverse this trend.
Details: The Office of the Comptroller of the Currency finalized a rule it first proposed last November, saying decisions the industry made violated its fair access policy.
- It only affects banks with more than $ 100 billion in assets, which, according to the OCC, “can exercise significant pricing power or influence sectors of the national economy”.
- This would include Citi, Goldman Sachs, and JPMorgan Chase – each of which has limited loans for certain types of new energy projects. It also includes Bank of America, which said in 2018 it would stop funding manufacturers of military-style firearms.
What they say:
Brian brooks, who stepped down as Acting Controller of the Mint just hours after the rule was finalized:
“When a large bank decides to cut off access to charities or even embassies serving dangerous parts of the world or businesses with legal activities in the United States that support local jobs and the national economy, it must show its work and the legitimate business reasons for doing so … In addition, elected officials should determine what is legal and illegal in our country. “
Greg Baer, Chairman and CEO of the Bank Policy Institute:
“The rule lacks both logic and legal basis, it ignores the basic facts about how banks operate, and it will compromise the safety and soundness of the banks to which it applies.” Its substantive problems are only offset by the glaring procedural flaws in the rule-making process. , and for these reasons, it is unlikely to withstand scrutiny. “
Between the lines: The Trump administration is rushing to finalize a series of rules ahead of next Wednesday’s transition of power, including a controversial Treasury effort to apply many traditional banking standards to self-hosted cryptocurrency wallets. Much of it can be overruled by the new Biden administration.
Looking forward: It is expected that the OCC will struggle to enforce this rule, even if it remains on the books.