It’s an old federal agency, dating back to the Abraham Lincoln administration. It’s relatively small, too, by federal government standards — at last count it only has 3,500 employees. But the Office of the Comptroller of the Currency (OCC), which is tasked with ensuring the security of the U.S. banking sector, recently proposed a rule that could have long-term consequences for climate action.
One organization, the sustainability advocacy group Ceres, isn’t having it.
The controversy is over a rule the OCC proposed back in November. Stating that its goal is to secure “fair access to financial services,” the rule would prohibit banks from deciding not to fund certain industries or projects. The public comment period ended yesterday, Jan. 4 — and if the rule moves forward, banks declining to loan funds for oil and gas projects would have to backtrack.
As the clock ticks on the Trump administration, which despite the expected shenanigans in Congress tomorrow will sunset on Jan. 20, the OCC’s proposed rule is yet another example of the Trump White House kicking in as many doors as possible as it’s shown the exit. And as more stakeholder groups pressure the banking sector to divest or stop funding fossil fuel projects, it’s clear this is one more example of how the current administration is doing whatever it can to leave its imprint on federal policy.
While the OCC denies conservative politics are behind this proposed rule change, saying there have also been calls to “de-bank” organizations like Planned Parenthood, independent ATM operators and agricultural companies, it’s clear the effects of the Barack Obama administration’s Operation Choke Point helped sway the OCC toward suggesting this rule change. Critics of that policy — which the Obama White House designed to limit access to funding by the likes of gun retailers and payday lenders in order to stop predatory and deceptive businesses from continuing their operations — accused the program of overreach, saying it denied banking services to legitimate companies.
Supporters of Operation Choke Point say the reversal would force banks to do business with companies to which their stakeholders — including customers — would object, opening a can of governance worms.
But in politics, timing is often everything, and that is where Ceres is taking a stand.
From Ceres’ point of view, a reversal of the OCC rule would actually put more financial institutions at risk, as they would be compelled to fund projects that are at risk of becoming stranded assets, flying in the face of their climate action and risk mitigation plans.
“This proposed rule is an outrageous last-ditch attempt to obstruct progress to address climate change as a systemic financial risk,” said Steven M. Rothstein of Ceres in an emailed statement. “The OCC’s job is to ensure the safety and security of the U.S. banking systemic system. Climate change presents a clear threat to that system, and in turn to the U.S. economy and all who depend on it.”
Rothstein added: “Banks have begun taking steps to protect against that risk, and the OCC should help them down that path, not throw hurdles in the way. Any proposal that would make it harder for banks to mitigate their exposure to climate risk jeopardizes efforts to maintain sustainable capital markets and to build a more resilient economy.”
Yesterday’s OCC deadline for public comment was also a point of contention for Ceres, which argued that the timing imposed an atypically tight deadline. Further, Ceres argues this policy flies in the face of what the private sector says it wants in the first place.
“The proposal is widely seen as an attempt to make the oil and gas sector a protected asset class in the U.S.” the group said in a public statement. “Nearly every major U.S. bank has committed to stop funding oil and gas drilling in the Arctic, while Barclays [and] JPMorgan Chase have committed to align their lending with the goals of the Paris Agreement or a net-zero emissions pathway.”
According to a recent Ceres report, the U.S. banking system is already at far greater risk than most banks have currently disclosed to their shareholders — and regulators and investors still don’t have their heads fully wrapped over the potential threats the sector faces unless it takes bolder climate action.
Image credit: Erol Ahmed/Unsplash
Leon Kaye has written for 3p since 2010 and become executive editor in 2018. His previous work includes writing for the Guardian as well as other online and print publications. In addition, he's worked in sales executive roles within technology and financial research companies, as well as for a public relations firm, for which he consulted with one of the globe’s leading sustainability initiatives. Currently living in Central California, he’s traveled to 70-plus countries and has lived and worked in South Korea, the United Arab Emirates and Uruguay.
Leon’s an alum of Fresno State, the University of Maryland, Baltimore County and the University of Southern California's Marshall Business School. He enjoys traveling abroad as well as exploring California’s Central Coast and the Sierra Nevadas.
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