The Office of the Comptroller of the Currency, an independent bureau within the United States Department of the Treasury, has finalized a new mandate on bank lending. Though aimed at expanding access to banking services, CEI Senior Fellow John Berlau warns the rule will impose significant red tape and political worries on banks of all sizes:

“The final ‘fair access to financial services’ rule released by the Office of Comptroller of the Currency is the wrong answer for politically disfavored businesses and will burden banks of all sizes with more red-tape and government-interference with financial transactions. The rule will lead to more, not less, politicization of the financial sector as businesses from abortion providers to gun manufacturers can harangue Main Street banks for ‘political bias’ in routine lending decisions. CEI believes the government should neither pressure banks to avoid certain industries, as the Obama administration did in the now-defunct Operation Choke Point, nor force banks to provide financing to these industries, as this rule would do.

“It is especially disappointing that the final rule does not appear to exempt banks of any size from its reach. While the OCC states a ‘presumption’ of $100 billion asset threshold, it specifically adds that banks smaller than this size could be subject to the rule if they meet a vague definition of ‘raising the price’ of a financial service. This will leave a costly state of uncertainty for the nation’s smallest banks.

“As I noted in comments to the OCC, the rule ‘would particularly harm the new entrants to financial services that the OCC is now rightly championing. These firms may have specific fintech areas of expertise, or they may wish to specialize in serving businesses specific to their respective communities.’ Thus, these banks may get punished by this rule for excluding types of businesses outside their areas of specialization.