Fed Unveils Plan on Eliminating Reputation Risk in Bank Exam (1)

The Federal Reserve unveiled a new proposal that further targets how examiners scrutinize banks’ risk after President Donald Trump moved to rein in what he sees as the closing of customer accounts for unfair reasons.

The new plan, which is subject to public consultation, would seek to explicitly prohibit examiners from “penalizing or prohibiting” a firm from banking a customer engaged in legal activity. Instead, examinations should prioritize risks that threaten bank safety and soundness.

“We have heard troubling cases of debanking — where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their ...