Banking and Finance Law Daily OCC prohibits dealing or investing in industrial or commercial metals
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Wednesday, December 28, 2016

OCC prohibits dealing or investing in industrial or commercial metals

By John M. Pachkowski, J.D.

The Office of the Comptroller of the Currency submitted to the Federal Register a final rule to prohibit national banks and federal savings associations from dealing or investing in industrial or commercial metals. The effective date of the final rule is April 1, 2017.

The final rule carries out an OCC recommendation included in its report to Congress and the Financial Stability Oversight Council under section 620 of the Dodd-Frank Act. Section 620 required the federal banking agencies to conduct a study of the activities and investments that banking entities may engage in under state and federal law and to consider the associated risks and how banking entities mitigate those risks (see Banking and Finance Law Daily, Sept. 9, 2016).

The final rule covers metal, including alloy, in a physical form primarily suited to industrial or commercial uses. Examples include copper cathodes and aluminum T-bars. The final rule also supersedes OCC Interpretive Letter 693 which authorized national banks to buy and sell copper on the grounds that trading copper was becoming increasingly similar to trading gold, silver, platinum, and palladium. However, in the intervening years since the Interpretive Letter was issued, copper markets have not increased in similarity to precious metal markets and copper is generally traded as a base metal.

Permissible holdings. The rule continues to recognize that national banks and federal savings associations may hold industrial or commercial metal under authorities that are distinct from dealing and investing and does not change those authorities. For example, national banks and federal savings associations may acquire industrial or commercial metal through foreclosures on loans and then sell the metal to mitigate loan losses.

Divestiture. A bank with existing holdings of industrial and commercial metal acquired through dealing or investing activities must divest of the metal not later than one year from the effective date of the final rule. The OCC may grant up to four separate one-year extensions to dispose of industrial or commercial metal if a national bank makes a good faith effort to dispose of the metal and retention of the metal for an additional year is not inconsistent with the safe and sound operation of the bank.

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