OCC And FDIC Propose Rules To Eliminate Reputation Risk And Debanking

On October 7, the OCC and FDIC jointly proposed two rules to refocus bank supervision on material financial risks and eliminate "reputation risk" from their oversight frameworks. The first proposal would define the term unsafe or unsound practice under the Federal Deposit Insurance Act and revise the agencies' standards for issuing matters requiring attention (MRAs). The second proposal would codify the agencies' removal of reputation risk from supervisory programs and prohibit examiners from taking actions based on a bank's perceived reputational exposure.

The agencies stated that these efforts aim to promote consistency, clarity, and fairness in the supervisory process by concentrating on measurable financial risks rather than subjective reputational concerns.