The Office of the Comptroller of the Currency today released a report alleging that reputational risk policies caused large banks to “debank” customers because of their political beliefs or business activities.
The report examined the activities of the nine largest U.S. banks, as directed by President Trump under an executive order issued last year. The OCC alleged to have found multiple examples of public and nonpublic policies that restricted access to financial activities for certain industries – such as the oil and gas sector and firearms manufacturers – as well as clients on both sides of the political spectrum.
The OCC placed much of the blame on “inexact” reputational risk policies. “This practice infused the value judgments of stakeholders into banks’ business decisions,” the agency said. “In making these decisions, banks spent considerable time discussing potential impacts to customer loyalty, the views of government entities (including the banks’ own regulators), the risks of shareholder petitions, and opinions of advocacy groups on both sides of the political spectrum.”
The OCC, FDIC and Federal Reserve have all taken steps to remove reputational risk from their bank supervision since Trump’s executive order, including issuing a final rule earlier this year banning its use by supervisors.
