OCC’s Brooks Warns Governors, Mayors on Risks to Banks of Long-Term ‘Lockdowns’

As governors and municipal officials make decisions on reopening local economies in the wake of the coronavirus pandemic, Acting Comptroller of the Currency Brian Brooks warned them about the long-term risks of so-called lockdown orders on the financial system. “Certain aspects of these orders potentially threaten the stability and orderly functioning of the financial system the OCC is charged by law to protect,” he wrote in a letter to the U.S. Conference of Mayors.

Brooks offered four examples of how lockdown orders affect financial stability:

  • The value of commercial real estate collateral is affected by lengthy vacancies, including the risk of vandalism and burglary, as well as utility shutoffs in response to violations of local lockdown orders.
  • Lockdown orders impair businesses’ ability to generate the revenue needed to pay their loan obligations. “Such high delinquency rates have the potential to threaten the community and midsize banks that are the economic lifeblood of local communities,” he warned.
  • Understanding the “opaque and often shifting definition” of essential versus non-essential businesses creates challenges for banks in forecasting future delinquencies and assessing credit risk.
  • Long-term and even permanent face mask requirements “create the very real risk of increases in bank robberies. . . . recent reports of face-covering-related robberies at bank branches and other establishments make clear that broadly applicable face mask requirements are not safe or sustainable on a permanent basis.”

Brooks announced in an interview last week that the OCC would begin returning to in-office operations on June 21.