The Federal Reserve Board, FDIC and OCC have jointly updated interagency documents to delete references to reputational risk.
The agencies took this action to complement their earlier actions to end the use of reputational risk in supervision.
“As the agencies have previously noted, reputation risk can be misused by supervisors as a basis to encourage or pressure a bank to restrict individuals’ and legal businesses’ access to financial services due to their constitutionally protected political or religious beliefs, speech, or conduct or lawful business activities,” the agencies said, in a joint statement. “These updates help ensure supervisory decisions are based on material financial risks, as well as increase clarity and facilitate greater precision in supervisory decision making. The updates to interagency documents are limited to removing references to reputation risk.”
The agencies said they continue to review their supervisory materials and may update additional documents as appropriate.
In response to President Trump’s August 7 Executive Order, “Guaranteeing Fair Banking for All Americans,” the FDIC and the OCC have approved the joint publication of a Notice of Proposed Rulemaking that would codify the removal of reputational risk from their supervisory programs. The NCUA has taken a similar action, and the Federal Reserve Board announced the elimination of reputational risk as a component of examination programs in its supervision of banks.
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