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U.S. Pauses Rule That Says Banks Can’t Reject Loans To Oil & Gas

The Office of the Comptroller of the Currency (OCC) is pausing the publication of a rule that would make large American banks unable to deny lending money to oil and gas companies until the Biden Administration’s pick for head of the watchdog reviews the final rule and the public comments received.  

OCC said on Thursday it had paused publication of its rule that aims to ensure large banks provide all customers fair access to their services. 

Days before the end of the Trump Administration, OCC finalized the rule under which America’s largest banks with more than $100 billion in assets cannot deny lending money to oil and gas companies.

OCC released earlier this month its finalized rule to ensure the so-called fair access to banking services, under which “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.”

But banks have grown increasingly aware of the reputational consequences of providing lending to oil and gas projects in sensitive areas such as the Arctic, for example. In the United States, Goldman Sachs said in December 2019 that it would decline to finance new Arctic oil exploration and production and new thermal coal mine development or strip mining. Wells Fargo, JPMorgan, and Deutsche Bank have also said they would stop financing new oil and gas projects in the Arctic.  

The largest U.S. banks have criticized the rule, saying that it “would also appear to prohibit banks from using subjective judgment and qualitative considerations, including reputational risk, in deciding whether to provide a financial service, which is entirely inconsistent with how the OCC has historically expected banks to make risk management decisions.”

Now OCC said in a brief statement today:

“Pausing publication of the rule in the Federal Register will allow the next confirmed Comptroller of the Currency to review the final rule and the public comments the OCC received, as part of an orderly transition.”  

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By Charles Kennedy for Oilprice.com

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