The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp. (FDIC) are seeking input on a joint notice of proposed rulemaking to eliminate “reputation risk” from their supervisory programs.
With the joint proposal, the agencies are seeking to define reputation risk – which financial institutions have cited in the past as a reason for denying banking services to individuals and entities – and prohibit regulators from using it as a basis for criticizing or taking adverse action against an institution.
They are also proposing to prohibit agencies form requiring, instructing or encouraging an institution to close customer accounts or take other actions against a person or entity on the basis of their 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 agencies issued the proposed rulemaking in response to Executive Order 14331, Guaranteeing Fair Banking for All Americans, in which the Trump administration outlined concerns that reputation risk could be used as a pretext for restricting individuals and businesses from access to financial services on the basis of political or religious beliefs or lawful business activities.
Independent Community Bankers of America President and CEO Rebeca Romero Rainey issued a statement expressing support for the supervisory changes proposed by the agencies.
“ICBA and the nation’s community bankers commend the FDIC and OCC for today’s proposals to remove reputation risk from their supervisory programs and to promote greater uniformity regarding their enforcement and supervision standards,” she said. “Prioritizing material financial risks over sometimes arbitrary supervisory concerns related to policies, process, documentation, and other nonfinancial risks facilitates a tailored regulatory framework that allows community banks to meet the needs of the local communities in which they’re based.”
Comments on the attached proposal are due 60 days after the date of publication in the Federal Register.