A rule removing references to “reputation risk” in the national bank regulator’s regulations will soon be proposed, and the agency will also review whether banks have engaged in “debanking” and take remedial actions “if appropriate,” the agency’s leader said Friday.
Comptroller of the Currency Jonathan Gould issued a statement calling for the rule and review that he said was in response to an executive order issued Thursday by President Donald Trump (R ). Trump titled his order “Guaranteeing Fair Banking For All Americans.”
Late Friday, the chairman of the Federal Deposit Insurance Corp. (FDIC) weighed in, saying his agency would take a similar approach.
In his order, Trump claimed that banks have used “unacceptable practices to restrict law-abiding individuals’ and businesses’ access to financial services on the basis of political or religious beliefs or lawful business activities.”
“Some financial institutions participated in Government-directed surveillance programs targeting persons participating in activities and causes commonly associated with conservatism and the political right following the events that occurred at or near the United States Capitol on January 6, 2021,” Trump alleged in the order.
He pointed to “Operation Chokepoint,” a program that started in 2013 and ended in 2017, as another example. He called it a “well-documented and systemic means by which Federal regulators pushed banks to minimize their involvement with individuals and companies engaged in lawful activities and industries disfavored by regulators based on factors other than individualized, objective, risk-based standards.
That program, started by the Department of Justice and enforced by federal bank regulators, including the Federal Deposit Insurance Corp. (FDIC), aimed to stop fraud by pressuring banks to sever ties with certain legally operating businesses deemed “high risk.” Those included payday lenders, firearms dealers and escort services. The DOJ considered those businesses vulnerable to fraud and money laundering.
Gould said “fair access to financial services” is a fundamental principle of the U.S. banking system. “It is unacceptable for banks to discriminate against any customer on the basis of political or religious beliefs or lawful business activities.”
He added that Trump’s order “affirms that banks should provide access to financial services based on individualized, objective, and risk-based analyses.”
Gould said the OCC would “soon” propose a rule removing references to reputation risk from its regulations. Earlier this year, the agency removed such references from its handbooks and guidances, Gould said.
“The OCC will also commence a review to assess the extent to which the institutions it supervises have or are engaged in politicized or unlawful debanking and take remedial actions if appropriate,” Gould stated. “The OCC is exploring additional steps to ensure politicized or unlawful debanking is never repeated.”
Late Friday, following Gould’s statement, FDIC Chairman Travis Hill said his agency plans to issue its own rulemaking prohibiting examiners from criticizing institutions on the basis of reputational risk or directing or encouraging institutions to close accounts on the basis of political, social, religious, or other views. Hill said the FDIC also plans to review whether FDIC-supervised institutions have engaged in politicized or unlawful debanking.
Comptroller Gould Issues Statement on Executive Order “Guaranteeing Fair Banking For All Americans”