New resource analyzes NCUA’s reputation risk final rule
NCUA recently finalized its rule eliminating reputation risk from its supervisory framework, which takes effect July 27. In its latest Final Rule Summary, America’s Credit Unions examines the rule in detail. It prohibits the NCUA from criticizing or taking adverse actions against a federally insured credit union on the basis of reputation risk.
Specifically, it:
- Makes clear that supervisory decisions must be based on objective factors (e.g., law, safety, soundness, compliance, risk management) and not based on personal preferences (e.g., political, social, cultural, religious) of anyone working at the NCUA; and
- Adds the term “operational” to the definition of “reputation risk” to distinguish operational issues from reputation concerns so that operational concerns remain subject to supervision even though reputation risk itself is prohibited as a supervisory factor.
The summary details the impact to credit unions, background of the rule, and a section-by-section analysis of the text.