OCC Announces It Will Remove “Reputation Risk” from Bank Examination Manual
The Office of the Comptroller of the Currency (OCC) recently announced that it will remove the term “reputation risk” from its examination manual. The examination teams will not monitor national banks for risks resulting from doing business with customers like those in payday lending, crypto, firearms, and oil and gas industries.
“This marks meaningful progress in refocusing oversight on material financial risk, rather than reputational risk, operational risk, corporate governance, vendor management and other matters that do not pose a material threat to safety and soundness,” said Greg Baer, the president and CEO of the Bank Policy Institute, in a statement, according to Bloomberg Law.
The OCC’s announcement comes after a call from GOP lawmakers to end “debanking” practices. Senator Tim Scott (R-S.C.), Chairman of the Senate Banking Committee, introduced a bill earlier this month to eliminate reputational risks used by regulators to evaluate the soundness of banks. Banking Dive noted that the bill is headed to the Senate floor and has support from banks and industry trade groups.
Last month, Federal Reserve (Fed) Chair Jerome Powell pledged to remove language from a Fed manual that tells bank officials to be on the lookout for “controversial commentary or activities” by the leadership of financial institutions.
OCC examiners will evaluate whether banks have the proper risk management tools in place to protect against threats to their safety, rather than focusing on reputational risks. Rodney Hood, acting head of the OCC, emphasized that this would improve “public confidence in the OCC’s supervisory process and makes clear that the OCC has not and does not make business decisions for banks.”
The OCC expects to update its public documents within the next several weeks. “The OCC’s examination process has always been rooted in ensuring appropriate risk management processes for bank activities, not casting judgment on how a particular activity may fare with public opinion,” Hood said.
