In a final act of his tenure, Brian Brooks, the acting Comptroller of the Currency (OCC) on January 14 finalized a rule to ensure “fair access to banking services provided by large national banks, federal savings associations, and federal branches and agencies of foreign bank organizations.” Brooks announced that he would be stepping down from his role on the same day the rule was finalized. OCC Chief Operating Officer Blake Paulson will assume the role as acting comptroller of the currency.

Under the rule, the nation’s largest banks may still determine their product lines and geographic markets and make legitimate business decisions about what and whom they serve, so long as those decisions are “based on consideration of quantitative, impartial, risk-based standards established by the bank.” By way of background, some large banks have been pressured to forgo making loans to certain sectors of the economy, such as energy firms in the fossil-fuels market, based upon public actions by certain groups. In addition, Operation Chokepoint was a targeted effort by certain parts of the Obama Administration to cut off access to the high-cost lending industry.

According to Brooks, the rule is aimed at preventing banks with more than $100 billion in assets from denying loan applications and refusing to provide services to certain industries and entire categories of customers without conducting “individual risk assessments.” Brooks stated, “it is inconsistent with basic principles of prudent risk management to make decisions based solely on conclusory or categorical assertions of risk without actual analysis.”

After considering more than 35,000 stakeholder comments during the public comment period that ended on January 4, the OCC determined to exclude a section from the initial proposal which would have required that a covered bank not deny any person a financial service the bank offers “when the effect of the denial is to prevent, limit, or otherwise disadvantage the person: (1) from entering or competing in a market or business segment; or (2) in such a way that benefits another person or business activity in which the covered bank has a financial interest.” The agency concluded that this requirement “would have resulted in regulatory burden without contributing to the primary objective of the rule.” In its press release, the OCC stated the remainder of the rule is “substantially unchanged from the proposal.”

The rule, which is set to go into effect in April 2021, was finalized in just 10 days after its public comment period ended—a surprisingly quick turnaround for a federal rule, particularly given the large volume of comments and the opposition to the rule by the banking industry.

Despite the softening of the rule from its initial proposal, the future of the rule is unclear. With President-elect Biden expected to appoint a new acting comptroller upon his inauguration on January 20, it is unclear whether the new administration will seek to delay the effective date of the rule, or seek to repeal it altogether. Regardless, banks subject to the final rule should be prepared to adjust their risk assessment and decision-making processes to ensure compliance with the new rule.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Rick Eckman Rick Eckman

Rick Eckman represents financial institutions and non-regulated entities in a range of matters involving investment management, commercial and consumer financial services, public finance and trusts. Drawing upon many years of experience inside the banking industry and involvement in drafting key banking regulations, he

Rick Eckman represents financial institutions and non-regulated entities in a range of matters involving investment management, commercial and consumer financial services, public finance and trusts. Drawing upon many years of experience inside the banking industry and involvement in drafting key banking regulations, he is a trusted advisor on operational and regulatory issues.

Photo of Cody Mathis Cody Mathis

Cody assists public and private companies in all aspects of corporate and securities transactions including securities offerings, SEC reporting, corporate governance and compliance matters, mergers and acquisitions, business entity formations and general corporate matters. In addition, he focuses on assisting community banks with

Cody assists public and private companies in all aspects of corporate and securities transactions including securities offerings, SEC reporting, corporate governance and compliance matters, mergers and acquisitions, business entity formations and general corporate matters. In addition, he focuses on assisting community banks with regulatory compliance matters, capital raising activities, and mergers and acquisitions

Photo of Shannon Patterson Shannon Patterson

Shannon represents companies of all sizes in various industries, with a focus on public companies in the community banking and wider financial services sector. She advises clients on securities law, corporate governance and executive compensation matters. Shannon assists public companies in satisfying the

Shannon represents companies of all sizes in various industries, with a focus on public companies in the community banking and wider financial services sector. She advises clients on securities law, corporate governance and executive compensation matters. Shannon assists public companies in satisfying the disclosure and corporate governance requirements of the U.S. Securities and Exchange Commission, the New York Stock Exchange and the Nasdaq Stock Market. Shannon works closely with clients’ compliance personnel to design and implement internal policies and procedures to satisfy corporate and regulatory requirements relating to a range of governance matters including cybersecurity risk management.

Photo of Gregory Parisi Gregory Parisi

With nearly 20 years of experience, Greg Parisi focuses on capital markets transactions, mergers and acquisitions, securities law and exchange compliance, public disclosure obligations, corporate governance, and commercial matters.

Photo of James Stevens James Stevens

James Stevens provides general corporate and regulatory advice to our clients. James has substantial experience in the representation of public and private companies, including financial institutions, marketplace lenders and other FinTech and financial services companies, in mergers and acquisitions, securities offerings and regulatory…

James Stevens provides general corporate and regulatory advice to our clients. James has substantial experience in the representation of public and private companies, including financial institutions, marketplace lenders and other FinTech and financial services companies, in mergers and acquisitions, securities offerings and regulatory reporting and compliance. He often serves as the principal outside counsel for these clients.