The Federal Reserve has launched a 60-day public consultation on a new proposal to permanently eliminate the review of 'reputational risk' in bank regulations. Under the proposed changes, examiners would be required to focus solely on material risks that directly threaten the safety and soundness of banking institutions.
This initiative aims to prevent unwarranted restrictions against clients engaged in lawful business activities, including cryptocurrency-related services. The shift represents a significant evolution in regulatory philosophy, prioritizing concrete financial risks over subjective assessments.
Key changes proposed:
- Remove requirements for reputational risk evaluation
- Focus exclusively on risks to institutional stability
- Prevent discriminatory limitations on legal enterprises
If adopted, the reform could reshape compliance approaches across the banking sector and create new opportunities for innovative financial services.