Trump’s Bank Regulators Must Not Walk Away from Financial Institutions Reputational Risk
WASHINGTON, D.C. — Public Citizen today called on the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to reverse course on a proposed rule that would codify the elimination of reputation risk from the agencies’ supervisory programs.
In December, the OCC released a report claiming that firms in numerous sectors—including oil and gas, digital assets, private prisons, payday lending, and adult entertainment—have been inappropriately denied banking services due to the reputation risk of these firms. OCC Comptroller Jonathan Gould stated that “Going forward, the OCC will hold banks accountable for these actions” despite no laws prohibiting banks from denying services to firms they believe expose the bank to reputational harm.
In response, Elyse Schupak, policy advocate with Public Citizen’s Climate Program, issued the following statement:
“Prohibiting the use of reputation risk by bank supervisors is a gift to digital asset, fossil fuel, and other risky industries that seek to limit oversight. Reputation risks have materially impacted bank safety and soundness in the past and will continue to do so, whether or not they are monitored by supervisors. Rather than remove risk categories from their supervisory programs, the OCC and FDIC should prioritize adequately resourcing bank examiners so that they can monitor and manage the broad range of risks banks face.
“Threatening to punish banks making their own determinations of reputation risk creates a chilling effect for banks looking to manage their exposure to risky industries. Limiting the consideration of reputation risk is a political project that grants favoritism for the President’s political allies and financial backers. It does not promote the safety and soundness of supervised institutions or stability in the banking system.”
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