The Federal Reserve Board has announced a significant change in its supervisory approach, stating that reputational risk will no longer be part of the examination programs for banks. This update was disclosed on Monday and marks a shift in how the Board supervises financial institutions.
The process to remove references to reputation and reputational risk from supervisory materials, including examination manuals, is already underway. These references will be replaced with more specific discussions focused on financial risk where applicable. To ensure consistent implementation of this change across all Board-supervised banks, examiners will receive targeted training. The Federal Reserve also plans to collaborate with other federal bank regulatory agencies to encourage uniform practices.
Despite this adjustment, the Board emphasizes that it still expects banks to maintain robust risk management systems to guarantee safety, soundness, and compliance with laws and regulations. Furthermore, the modification is not intended to influence whether or how banks supervised by the Board incorporate reputational risk into their internal risk management strategies.
