According to the document, the FDIC has completed a “review of all mentions of reputational risk” in its regulations and policy documents and has “plans to eradicate this concept from our regulatory approach.”Reputational risk and debankingThe Federal Reserve defines reputational risk as “the potential that negative publicity regarding an institution’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions.”The FIDC letter specifically mentioned digital assets, with Hill noting that the agency has generally been “closed for business” for institutions interested in blockchain or distributed ledger technology.
Dan Meuser on March 24, banking regulators should not use “reputational risk” to scrutinize firms.“While a bank’s reputation is critically important, most activities that could threaten a bank’s reputation do so through traditional risk channels (e.g., credit risk, market risk, etc.) that supervisors already focus on,” notes the letter, first reported by Politico.
The US Federal Deposit Insurance Corporation, an independent agency of the federal government, is reportedly moving to stop using the “reputational risk” category as a way to supervise banks.
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Author / Journalist: Cointelegraph by Christopher Tepedino
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