Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency propose rule barring supervisors from using reputation risk and remove it from FDIC exam materials

The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC) issued a joint notice of proposed rulemaking to prohibit their supervisors from using reputation risk in supervision, codifying its removal from their supervisory programs. In parallel, the FDIC removed references to reputation risk from its guidance, policy documents and examination manuals to reflect instructions to examiners not to use reputation risk as a basis for supervisory criticism. Under the proposal, the agencies would be prohibited from criticizing, formally or informally, or taking adverse action against an institution or any employee on the basis of reputation risk. The proposal would also prohibit requiring, instructing or encouraging institutions to close customer accounts or take other actions based on a person or entity’s political, social, cultural or religious views or beliefs, constitutionally protected speech, or solely on the basis of politically disfavored but lawful business activities perceived to present reputation risk. The proposed rule would not impose requirements or obligations on supervised institutions. FDIC manual and document updates include the Risk Management Manual of Examination Policies, Application Procedures Manual, Trust Examination Manual, Applying For Deposit Insurance – A Handbook for Organizers, and the Consumer Compliance Examination Manual. Comments are due 60 days after publication in the Federal Register. The FDIC will continue working with other federal banking agencies to remove references to reputation risk from interagency materials.