Climate Chaos NGOs Name Top Banks Who Put $3 8 Trillion Into Fossil Fuels
Major banks, climate activists, and banking reform advocates disagree on many things, but they have joined forces to condemn a new rule from the Trump administration that will make it harder for banks to sever relations and reduce engagement with the fossil fuel industry..
A rule recently adopted by the Office of the Comptroller of the Currency (OOC) under the US Treasury requires major banks to conduct a documented and individual assessment of pending clients before rejecting loan applications. This means that banks cannot simply turn down loan requests from fossil fuel companies, weapons manufacturing or other industries simply because these companies do not align with the corporate values of the lenders..
The OCC faced backlash when it first proposed introducing the rule in November. The agency received about 31,000 comments "against" this rule and much less in its favor. In response, the OCC softened it by removing a section that would create new restrictions for banks, explicitly prohibiting them from refusing to issue loans in certain cases..
Patricia McCoy (Patricia McCoy), a professor at Boston College Law School, said the change was «gives much more opportunities», than when it was first formulated.
The rule affecting banks with assets over $ 100 billion is the final chord in the regulatory practice of the eight-month tenure of the acting controller of the currency Brian Brooks (Brian Brooks), who resigned Thursday.
«Brian Brooks did what I never thought was possible: he brought the banking industry and reform advocates together», – said about the proposed rule Isaac Boltanski (Isaac Boltansky), Director of Policy Research, Compass Point Research & Trading. «They have banded together on the basis of opposition to this rule, which is confusing, ill-conceived and problematic from an operational point of view.».
The American Bankers Association (ABA), an influential lobbying group whose banks hold $ 17 trillion in deposits, criticized the OCC for making a hasty decision on Brooks’ last day in office and said the rule should not go into effect..
«In addition to shortening the traditional rulemaking process and failing to heed the sound comments of thousands of stakeholders, we find it a mistake to tell OCC which businesses banks should serve.», – said Hugh Carney (Hugh Carney), Senior Vice President, ABA. prudential regulation, the statement said.
Senator Democrat Sherrod Brown (Sherrod Brown), new chairman of the Senate Banking Committee, supports ABA’s opinion.
«Forcing banks to make risky investments is a bad idea», – Brown told CNN Business last week. «Ultimately, it won’t serve the financial system or the country.».
Brown added that Brooks, controller of the OCC, «joins a long line of Trump candidates who care about their past and future business interests».
Brooks said in a statement Thursday that the banks «must show their work», before refusing credit.
«Banks should not stop serving entire categories of customers without conducting an individual risk assessment», – he said, adding that «elected officials must determine what is legal and illegal in our country».
The rule is due to take effect in April, but it is not yet clear if this will happen..
It is possible that lawmakers will be able to reverse this through the Congressional Revision Act, which allows Congress to overturn ordinances imposed by the executive. For example, the president-elect Joe Biden promised to solve the problem of the climate crisis, including by joining the Paris Climate Agreement.
Boltanski said he «sure», that the Biden administration will work to change this rule.
Environmental groups feared the rule would diminish the growing tendency of large banks to distance themselves from oil and coal companies, whose long-term fortunes are threatened by the climate crisis..
«This proposed rule is an outrageous latest attempt to thwart progress in tackling climate change as a systemic financial risk.», – said last week the managing director of Ceres Accelerator for Sustainable Capital Markets Stephen Rothstein (Steven Rothstein).
Due to the worsening climate crisis, some large banks have recently refused to provide certain loans in the hope of reducing both their reputational and credit risks..
In 2019, Goldman Sachs became the first major US bank to commit itself not to issue loans for drilling in the Arctic. Many other big banks have followed suit..
And last fall, JPMorgan Chase said it would move away from lending, capital market services and other services to companies that derive most of their revenue from coal mining. JPMorgan also pledged to push clients to align their business practices with the Paris Climate Agreement..
OCC is responsible for ensuring that lenders ensure fair access to financial services and fair treatment of customers. The aim is to ensure that banks do not repeat the mistakes associated with so-called practice «red line» (redlining), systematic refusal to lend to the poor and minorities.
But the OCC’s stated mission is also to ensure that national banks «worked reliably and safely».
Patricia McCoy, a former regulator at the Consumer Financial Protection Bureau, points out that the risk of climate change «poses a long-term safety and sustainability challenge for national banks that lend to the fossil fuel industry».
This is because the escalating climate crisis darkens the prospects for fossil fuel companies. Coal companies went bankrupt. Investors have dramatically reduced the value of oil and gas companies and thus made it difficult for them to raise capital. Tough Climate Action by Lawmakers in Washington Will Create More Challenges for the Fossil Fuels Industry.
«Banks have begun to take action to protect against this [climate] risk», – Ceres, a nonprofit human rights organization, said in a statement. «OCC should help them walk this path, not obstruct them.».