Political polarization poses a long-term risk to banks, the acting Comptroller of the Currency said. Michael J. Hsu He said on Wednesday (July 17th).
of Office of the Comptroller of the Currency Su said the OCC faces the risk of fragmentation as it monitors developments in banking law at the state and local levels. Written comments Speech delivered at the Exchequer Club.
“To varying degrees, culture wars, identity politics and the weaponization of finance are increasingly fracturing the U.S. financial system,” Su said in her remarks. “Banks are increasingly being asked by countries to choose sides that serve performance politics rather than deliberative policy.”
Reuters reported on Wednesday report Texas passed a law saying banks can’t do business with the state if they discriminate against industries like fossil fuels or firearms, and Florida and Texas have passed laws prohibiting banks from discriminating against anyone based on political or religious beliefs.
In a written opinion, Xu said the OCC is a bulwark against this trend, noting that the regulator got its start in the 1800s by consolidating the then-fragmented banking system.
“The OCC has been and will continue to vigorously defend preference rights because they are at the heart of our dual banking system and are at the heart of why we exist and who we are,” Su said.
In his remarks, Xu also cited two “underestimated long-term risks for banks.”
First, the number and size of big banks has grown: Since the most recent set of regulations governing big banks, Dodd-Frank, went into effect in 2014, their total assets have grown from $10 trillion to $17 trillion, Su said.
“To avoid repeating past mistakes, big banks need to be on a strong footing – they need to be resilient, solveable and manageable,” Su said.
A third long-term risk to banking is the complexity of relationships between banks and non-banks, which is increasing their interdependence and “blurring the lines between banking and commerce,” Su said.
“This makes it difficult to figure out who is responsible for what and is tragic for the millions of consumers and end users caught up in Synapse’s bankruptcy,” Su said.
