Bessent Takes On Reputational Risks for Financial Institutions in First Meeting as Chair of FSOC
WASHINGTON, D.C. — In his first meeting as the chair of the Financial Stability Oversight Council, Secretary of Treasury Scott Bessent made clear his support for ongoing efforts by federal bank regulators to put an end to the use of reputational risk in bank supervision. This risk factor helps regulators understand the impact that negative publicity regarding an institution’s business practices and involvement in costly litigation could have on its customer base and revenues. In addition, yesterday the Office of the Comptroller of the Currency, announced it would stop considering reputational risk for its regulated entities, and plans to remove mention of it from their Handbook. In response, Anne Perrault, senior finance policy counsel with Public Citizen’s Climate Program, issued the following statement:
“As a staggering and growing number of families lose their homes and livelihoods to climate-driven fires, hurricanes, and floods, the American public is understandably scrutinizing the behaviors of financial institutions responsible for the greenhouse gas emissions driving climate change. Major Wall Street Banks’ reputations will continue to take hits as these banks wildly profit from financing fossil fuels while idly witnessing families lose their hard-earned property and wealth to climate-related impacts created by this financing.
“Secretary Bessent’s push to remove reputation risk from bank exams obviously won’t make this risk disappear. Instead, it will only leave banks, their customers and their shareholders more exposed and less safe. The Financial Stability Oversight Council’s willful ignorance of this risk leaves it shirking its critical responsibility to protect our financial system.
“The broad trend towards deregulation on display in this FSOC meeting portends an unacceptable erosion of the few protections that Americans have against the gathering financial storm.”
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