The Fed Removes Reputation Risk Requirement in Bank Supervision Criteria
The Federal Reserve (The Fed), the central bank of the United States (US), has removed the reputation risk requirement from the bank examination criteria in the US, Tuesday (06/24) local time.
"The Federal Reserve Board announced on Monday that reputation risk will no longer be a component of the examination program in bank supervision," reported The Fed's official website.
According to The Fed's official website, supervisors are no longer allowed to use vague metrics to conduct examinations on financial institutions, particularly acting excessively like blocking legal services.
In addition, The Fed emphasizes that all references to reputation risk will be removed from supervision requirements and its guidance documents. This means that banking will no longer be penalized based on how bad something is, even if it is legal and profitable.
This effort is made to ensure that The Fed's expectations for all banking institutions to maintain strong risk management to ensure safety and health as well as compliance with laws and regulations are not altered.