Proposal would codify NCUA’s removal of reputation risk from exams

NCUA issued a proposal to codify the agency’s recent announcement that it is no longer using reputation risk in the examination and supervisory process.  The NCUA’s decision followed America’s Credit Unions’ continued outreach to urge the NCUA to exclude references to reputational risk and equivalent concepts.  A recent America’s Credit Unions webinar with NCUA staff and member credit unions provided clarity on the change.

Executive Order 14331, issued in August, requires federal banking regulators to remove the use of reputational risk or equivalent concepts that could result in politicized or unlawful debanking.

Monday’s proposed rule follows the order, and would prohibit NCUA from:

• Criticizing or taking adverse action against an institution (defined as an entity for which the NCUA makes or will make supervisory determinations or other decisions) either solely or jointly on the basis of reputation risk; and
• Requiring, instructing, or encouraging an institution to close an account, to refrain from providing an account, product, or service, or to modify or terminate any product or service on the basis of a person or entity’s political, social, cultural, or religious views or beliefs, constitutionally protected speech, or on the basis of “politically disfavored but lawful business activities perceived to present reputation risk.”

Comments are due Dec. 20.

Read the proposal