Federal Reserve Drops Reputational Risk Factor in Bank Oversight, Easing Path for Crypto Services
Key Points:
- The Federal Reserve has removed reputational risk from its bank examination criteria.
- This shift removes a barrier that previously discouraged U.S. banks from engaging with cryptocurrency services.
- The OCC and FDIC had already eliminated this requirement from their regulatory frameworks.
The U.S. Federal Reserve has officially taken reputational risk out of its supervisory framework for evaluating banks. This aligns the Fed’s approach with that of the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), potentially making it easier for banks to offer crypto-related services.
According to a press release, the Fed is revising its supervision rules, phasing out mentions of “reputation” and “reputational risk” from its manuals and guidelines. Instead, regulators will now focus on concrete financial risks during bank evaluations.
Critics, including Senator Cynthia Lummis, had previously condemned the use of reputational risk as a vague and obstructive standard, arguing it discouraged financial institutions from entering the crypto space.
The Fed also announced that it will begin retraining examiners and working with other regulatory agencies to implement the changes efficiently.
This is a developing story and will be updated as more details emerge.
