The federal government released on Friday a proposed rule aimed at preventing major banks from leveraging their funding from Arctic oil and gas projects, after several banks announced policies that prohibit or limit their investment in such projects, including the Arctic National Wildlife Refuge.
However, some experts and activists have said that the impact of the rules, if finalized, could be lessened if banks can show that choosing not to finance Arctic oil projects is a financial decision, not a political one.
The head of the Office of the Comptroller of the Currency, an independent office under the Department of the Treasury, said on Friday that the capital and services of banking systems must be accessible to all on an equal basis.
Banks can decline to support individual projects or clients based on their risk review, said Brian Brooks, the bureau’s acting controller. But they cannot adopt comprehensive policy approaches that only affect certain sectors in what is part of a rampant politicization of the banking sector, he said.
Since the end of last year, five of the largest banks in the country Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo have announced that they will withdraw from support for Arctic oil and gas projects.
Policies have followed pressure from conservation groups concerned about climate change. In addition, BlackRock, the world’s largest asset manager, urged companies earlier this year to highlight the steps they are taking to tackle global warming.
The proposed rule is consistent with the DoddFrank Wall Street Consumer Protection and Reform Act of 2010, and could lead to enforcement action for banks that violate it, he said.
The proposal follows a letter sent in June by Republican Alaskan Representatives Dan Sullivan and Lisa Murkowski, along with Republican Alaskan Representative Don Young, to the Chief of the Federal Reserve, the Comptroller of the Currency and the President. of the Federal Deposit Insurance Corp., under the proposed rule.
the letter said the policies of financial institutions could discriminate against Alaskan natives who depend on the oil and gas industry for their livelihood.
Brooks said Friday that the office of supervisors had not analyzed whether discrimination against Alaskan natives or other groups was the result of bank policies, although he said it affected natives of the Alaska and others who work with the North Slope oil industry.
I’ll leave it to others to assess the second-order effect, he said.
The letter led the board of supervisors to look into the oil and gas policies of banks in the Arctic, the proposed rule says. In doing so, the agency also found that the big banks had also stopped providing loans and other financial services in other sectors, such as coal mining and gun manufacturing, said Brooks.
Sullivan said in an interview on Friday that the proposed rule was essential to protect Alaska’s economic interests.
This tendency by big banks to block investment in Alaska is dangerous for Alaska’s economic future, he said. So I sound the alarm.
Sullivan has said he would like to see the rule finalized before Jan.20, when there is a distinct possibility that Trump is no longer president. (Like many of his fellow Republicans, Sullivan has not publicly recognized Democratic President-elect Joe Biden as the winner of the 2020 election.)
Daniel Stipano, who served as the office of the deputy chief comptrollers counsel for about 15 years until 2016, said the office had the power to issue such regulations.
If the rule is finalized, it can be challenged in court, he said.
Graham Steele, a former adviser to the Federal Reserve Bank in San Francisco and a former Democratic Senate staff member, said he believes the new rule, if finalized, would present much of an administrative inconvenience for the big banks.
Institutions will need to describe in more detail the reasons why new individual oil and gas projects in the Arctic are unhealthy, he said. They have probably already considered individual projects, for the most part, before announcing their general policies, he said.
I don’t see it as a game changer, he says.
Ben Cushing, a member of the Sierra Clubs Effort to Promote Divestment from Arctic Oil and Gas Projects, said the rule does not change the fact that Arctic drilling is a risky investment.
Contrary to claims by oil-backed politicians, banks don’t want to fund more Arctic drilling not because of a large liberal conspiracy, but because of its bad business, Cushing said.
Brooks said the proposed rule includes a 45-day comment period ending Jan.4.