ABA, state associations to agencies: Protect banks’ freedom to make business decisions

As ESG guidance and disclosures from regulators proliferate, banks must remain free to lend to, invest in and do business without government interference, the American Bankers Association and the 51 state bankers associations wrote today in a letter to financial regulators. “There is growing concern from our member banks about the impact those efforts may have on their continued ability to provide critical financial services to the customers and the communities they currently serve,” the associations said.

The associations noted that disclosures, standards and guidance related to environmental, social responsibility and governance factors are “often cast as flexible, non-binding, or targeted to certain segments of the market, while allowing for long transitions. In reality, the individual and cumulative effects of these agency actions have the potential to be acute, widespread, and anything but neutral.”

The groups cautioned policymakers not to use financial institutions as “proxies” to achieve their policy goals on climate change, social issues or other concerns. They also added that ESG-related risks should not be considered as separate from the overall risks that banks already monitor and manage and that disclosure requirements—such as climate risk disclosures proposed by the Securities and Exchange Commission—should “not be decoupled from longstanding concepts of materiality or imposed on banks unnecessarily.”