Toronto-Dominion Bank is being sucked into a review by America’s national banking regulator due to the size of its U.S. operation.Christopher Katsarov/The Globe and Mail
Canadian banking regulators’ efforts to promote integrity in the industry have run headlong into an American administration that doesn’t know the meaning of the word.
U.S. President Donald Trump is on a crusade to punish banks that purportedly discriminate against his supporters, and is co-opting the Office of the Comptroller of the Currency, or OCC, America’s national banking regulator, to do his bidding.
The OCC, which also supervises the U.S. subsidiaries of Canadian banks, is showing itself to be a fawning flunky.
It has stopped supervising banks for reputational risks that result in scandals or financial losses. Instead, the OCC is actively hunting for evidence that banks rejected customers or shuttered accounts for religious or political reasons – even threatening to make referrals to the Attorney-General as warranted.
Two major Canadian banks, Toronto-Dominion Bank and Bank of Montreal, are already being sucked into the OCC’s review simply by virtue of the size of their U.S. operations.
Rita Trichur: OSFI isn’t taking cues from America regarding reputation risks for banks
It is an awkward situation. Not only is the U.S. the main growth market for Canadian banks, but their home-country regulator, the Office of the Superintendent of Financial Institutions, or OSFI, is maintaining its focus on reputation risks.
The Integrity and Security Guideline is in effect, OSFI’s Superintendent of Financial Institutions Peter Routledge said in September. “There is no intention here to remove it.”
That OSFI guideline, finalized in 2024, requires lenders to have appropriate policies and procedures to guard against threats to their integrity or security, including foreign interference.
The OCC, meanwhile, is under orders from Mr. Trump to chastise banks that concern themselves with protecting their reputations by rejecting high-risk clients.
Last Wednesday, the OCC released the preliminary findings of its review of debanking activities by the nine largest national banks. They include JPMorgan Chase, Bank of America, Citibank, Wells Fargo, U.S. Bank, Capital One, PNC Bank and the U.S. arms of TD and BMO.
“The OCC is committed to ending efforts – whether instigated by regulators or banks – that would weaponize finance,” the OCC’s Comptroller of the Currency Jonathan Gould stated in a news release.
The OCC, however, failed to provide specific examples of malpractice at any of those financial institutions. Instead, it played along with Mr. Trump’s pantomime.
Feigning surprise, the OCC stressed that sectors subject to “restricted access” to financial services include energy companies involved in Arctic development, coal mining, firearms and private prisons along with immigrant detention centres, adult entertainment and digital assets.
It is purely a coincidence that most of those businesses align with Mr. Trump’s political agenda and some of his family’s investments.
Are we really to believe that banks have a problem with the pursuit of profits?
We’re talking about an industry that once fell all over itself to offer a full suite of services to Jeffrey Epstein.
Of course, if Mr. Trump was truly interested in stamping out discrimination, he wouldn’t have defanged the Consumer Financial Protection Bureau which was taking action against lenders for redlining Black customers.
Or perhaps he would have created new protections to prevent women’s payment data from being collected as evidence of abortions in criminal cases.
But none of this is being motivated by a desire to protect the public interest. No, this is about settling a personal score.
Back in August, Mr. Trump set in motion the OCC’s review by signing an executive order ostensibly guaranteeing fair banking for all Americans.
But he did so after publicly accusing big banks of spurning him as a customer.
JPMorgan Chase reportedly gave him 20 days to move “hundreds of millions of dollars in cash” and then Bank of America declined his offer to “deposit a billion dollars-plus,” according to Mr. Trump’s account of those events.
“The banks discriminated against me very badly,” Mr. Trump told CNBC in an interview on Aug. 5.
“They discriminated against many Conservatives … I think the word might be Trump supporters more than Conservatives,” he later said, adding “banks are not afraid of anything but a regulator.”
Two days later, Mr. Trump signed his executive order, accusing those same regulators of abusing their authority by supervising reputation risk at banks and encouraging lenders to engage in “unlawful debanking activities.”
“At the conclusion of its review, the OCC intends to hold these banks accountable for any unlawful debanking activities,” stated its preliminary report.
Government intervention in banks’ day-to-day business decisions, including client selection, is a dangerous game.
Mr. Trump’s intrusions at the OCC reek of political meddling. But for Canadian banks with U.S. charters, it smacks of foreign interference, too.