Last week, The League filed a comment letter with the NCUA, expressing our support for their proposal to codify the elimination of reputation risk from the agency’s supervisory program.
The proposed amendments would prohibit the NCUA from:
- Criticizing or taking adverse action against an institution (defined as an entity for which the NCUA makes or will make supervisory determinations or other decisions) either solely or jointly on the basis of reputation risk; and
- Requiring, instructing, or encouraging an institution to close an account, to refrain from providing an account, product, or service, or to modify or terminate any product or service on the basis of a person or entity’s political, social, cultural, or religious views or beliefs, constitutionally protected speech, or on the basis of “politically disfavored but lawful business activities perceived to present reputation risk.”
We told the NCUA that “removing reputation risk as a regulatory tool would help prevent abuse, while sharpening the NCUA’s focus on protecting credit unions’ safety and soundness based on quantifiable criteria and legal requirements. … [E]xaminers have had too much latitude to rely on ambiguous and entirely subjective concerns about reputation risk, based on nothing more than the personal preferences of examiners, without grounding their findings in measurable metrics or law.”
Our letter quoted (anonymously) the comments sent to us by two credit unions. One of them stressed the importance of letting each credit union evaluate its own reputation risks, based on its unique relationship with its members. The other offered an example of examiner overreach based on perceived reputation risk. We want to thank them both for their responses to our Comment Call.
The League will let you know about further developments on this proposal