Statement by Chairman Travis Hill on the Final Rule to Remove Reputational Risk from the FDIC’s Supervisory Program

Today’s final rule would codify the elimination of “reputation risk” from the FDIC’s supervisory program. While a bank’s reputation is critically important, and many financial institutions over the years have failed due to a loss of confidence,¹ supervisory focus on “reputation risk” outside of traditional risk channels (such as credit risk or market risk) adds little value to promoting safety and soundness. On the other hand, an explicit or implicit focus on “reputation risk” untethered from other risk channels can pressure banks into debanking law-abiding customers who are viewed unfavorably by supervisors. Today’s final rule is one step in ensuring we remain focused on our key responsibilities, color within the lines, and “keep the main thing the main thing.”²

I thank the FDIC and OCC staff for their work on the final rule and throughout the rulemaking process.