By Colleen M. Svelnis, J.D.
Republican members on the House Financial Services Committee, including Chairman Jeb Hensarling (R-Texas), have delivered letters to the heads of the banking regulatory agencies regarding Operation Choke Point. The letters call for the agencies to publicly disavow their “past, present, and future involvement in Operation Choke Point or any similar operation.” Letters were sent to the heads of the Federal Reserve, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the National Credit Union Administration, stating that the agencies should take internal actions to ensure “deposit account terminations are based on sound reasoning and potential risk, not political motive.”
The Congressmen promised to continue investigations into Operation Choke Point, saying “The Financial Services Committee will continue to investigate this matter. Your proactive efforts to require your staff to follow similar guidelines as those issued by the FDIC would help demonstrate to Congress, the public, and the financial institutions that you regulate” that agencies take seriously “the need for transparency and fairness in examinations.”
Agency letters. The letters requested the agencies do the following:
- disclaim their past, present, and future involvement in Operation Choke Point or any similar involvement;
- issue an FIL and memorandum for employees clarifying each agency’s policy for documenting and reporting recommendations and orders to insured depository institutions to terminate deposit account relationships; and
- confirm in writing to the Financial Services Committee that the agency heads have informed their employees of the policy, as well as the consequences for violating the policy.
FDIC memorandum. The letters reference an FDIC Financial Institution Letter and Internal Memorandum issued on Jan. 28, 2015. This Statement on Providing Banking Services encouraged institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers. The approach of using individual assessments was meant to counteract the broad-based assessments previously made under Operation Choke Point.
Additionally, the FDIC statement included the following:
- the FDIC encourages insured depository institutions to serve their communities and recognizes the importance of services they provide;
- the FDIC encourages institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers without regard to the risks presented by an individual customer or the bank’s ability to manage the risk;
- individual customers within broader customer categories present varying degrees of risk; and
- institutions are expected to assess the risks posed by an individual customer on a case-by-case basis and to implement controls to manage the relationship commensurate with the risks associated with each customer.
Gruenberg testimony. The letters also discuss FDIC Chairman Martin J. Gruenberg’s appearance during a House Financial Services Committee Oversight and Investigations Subcommittee hearing to examine the role of the FDIC in Operation Choke Point, where Gruenberg attempted to clarify the FDIC’s involvement in the Justice Department’s investigations, describing it as limited to “communication and cooperation.”
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