FDIC Proposes Rules to Narrow Bank Oversight, Drop ‘Reputation Risk’

Overview

• The FDIC board unanimously issued two notices of proposed rulemaking redefining supervisory standards and opened a 60-day public comment period.
• The first proposal would confine MRAs and Section 8 enforcement to practices that cause or are likely to cause material financial harm or raise failure risk and costs to the Deposit Insurance Fund.
• The second would formally remove reputation risk from oversight and prohibit examiners from urging banks to sever customer ties based on political, social, cultural or religious views, or lawful but controversial activities.
• Acting Chair Travis Hill said the changes aim to focus exam work on core financial risks while preserving the ability to proactively flag material issues.
• The initiatives formalize steps already taken and track the president’s August executive order on debanking, as the FDIC also weighs potential updates to CAMELS ratings and internal manuals.