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The Office of the Comptroller of the Currency this morning finalized a rule to prevent large banks from limiting their lending activities in certain industries, just hours after Acting Comptroller of the Currency Brian Brooks said he was leaving the agency.

Brooks said in a statement late yesterday that he would step down from his role today. The OCC’s chief operating officer, Blake Paulson, will take over as acting comptroller of the currency. Paulson joined the OCC in 1986.

“It has been a great honor to serve the United States as Acting Comptroller of the Currency,” Brooks said in a statement. “The Office of the Comptroller of the Currency (OCC) is the most extraordinary of federal agencies filled with the most dedicated, professional, and gifted staff any executive can hope to have. I am extremely proud of what we have accomplished together through what have been extraordinary times by any measure.”

One of Brooks’ final moves as OCC head was to finalize a rule first proposed two months ago that the OCC said in a statement would “ensure fair access to banking services provided by large national banks, federal savings associations, and federal branches and agencies of foreign bank organizations.”

The rule is aimed at preventing banks from refusing to lend to certain industries, such as oil and gas. It applies to the largest banks with more than $100 billion in assets “that may exert significant pricing power or influence over sectors of the national economy,” the OCC said.

Banks subject to the new rule can still determine their product lines and geographic markets, the OCC said. These banks must then make their products and services available to all customers in the communities they serve. Banks would still make lending decisions using “quantitative, impartial, risk-based standards established by the bank.”

The OCC said the rule “codifies more than a decade of OCC guidance stating that banks should conduct risk assessment of individual customers, rather than make broad-based decisions affecting whole categories or classes of customers, when provisioning access to services, capital, and credit.”

The public comment period for the rule ended Jan. 4. The OCC said it received more than 35,000 comments on the proposal. It goes into effect on April 1.

“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,” Brooks said in a statement. “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. 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. Moreover, elected officials should determine what is legal and illegal in our country.”

The Bank Policy Institute (BPI), a research and advocacy group representing large banks, criticized the new rule.

“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,” BPI President and CEO Greg Baer said in a statement. “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.  Its substantive problems are outweighed only by the egregious procedural failings of the rulemaking process, and for these reasons it is unlikely to withstand scrutiny.”

Brooks Steps Down from OCC, Finalizes Lending Rule

by Banker & Tradesman time to read: 2 min