Capital One Bank Faces Deposit Freezes in New York City for Failing to Submit Plans to 'Fight Discrimination'

New York regulators have placed a freeze on account deposits at Capital One Bank and Key Bank.

But that’s not all, here’s the most interesting part of this chaotic situation.

The reason the regulators froze deposits is that the bank didn’t do enough to ‘fight discrimination.’

Yes, that’s the real reason.

As reported by MarketWatch:

New York City’s banking commission voted to freeze deposits at Capital One Financial Corp. COF, +0.43% and KeyCorp’s KEY, -0.88% KeyBank after the two banks failed to submit required plans showing their efforts to halt discrimination, the city’s comptroller said in a statement on Thursday, alleging that the banks “outright refused to submit required policies.”

The comptroller, Brad Lander, also voted against designating Wells Fargo & Co. WFC, +0.07%, PNC Financial Services Group Inc.’s PNC, -1.05% PNC Bank and International Finance Bank to hold public funds, that statement said.

“Unfortunately, despite several opportunities to do so, five banks failed to comply with the New York City Banking Commission’s designation process – leaving us to conclude that they are not taking meaningful actions to combat discrimination in their operations and are not responsible stewards of public dollars,” Lander said.

All three members of the banking commission — which include the comptroller, mayor and finance commissioner — voted to take the action against Capital One and KeyCorp, which respectively held $7.2 million and $10 million in city deposits at the end of last month.

Both can service existing contracts for one year under the move.

The commission in February said that banks had to “submit to demonstrate a meaningful commitment to combat discrimination in employment, services, and lending,” the statement said. Shares of Capital One slipped 0.7% after hours, while Key was 0.3% lower.