The Fed will no longer explicitly consider reputational risk in the supervision of banks (joining the OCC and FDIC decisions from March 20 and 24, 2025).
The American people depend on financial regulators, including the Fed, to consider and assess all possible risks that could cause a bank to fail. Today’s decision to explicitly exclude reputational risk is a clear concession to the crypto industry. It also muddies the waters and sends a confusing message to banks as well as the Fed staff, because on the one hand, the Fed says, “This change does not alter the Board’s expectation that banks maintain strong risk management to ensure safety and soundness and compliance with law and regulation nor is it intended to impact whether and how Board-supervised banks use the concept of reputational risk in their own risk management practices.” But, on the other hand, it says that reputational risk is no longer a component of examination programs or bank supervision.