WASHINGTON— The U.S. Office of the Comptroller of the Currency announced that it has stopped assessing national banks and financial institutions for reputation risk after facing criticism from the crypto industry over its exclusion from the financial sector, The Block reported.
In a statement, OCC Acting Comptroller of the Currency Rodney E. Hood said the agency's examination process has been focused on "appropriate risk management processes," not on drawing judgment on certain activities.
"The OCC has never used reputation risk as a catch-all justification for supervisory action," Hood said. "Focusing future examination activities on more transparent risk areas improves public confidence in the OCC’s supervisory process and makes clear that the OCC has not and does not make business decisions for banks."
The OCC also said it would be removing references to reputation risk from its handbooks and guidance, though noted it would not change its expectation on how banks handle risks, The Block said.
“The OCC also recently set out to clarify that crypto activities are allowed in the federal banking system, representing a major reversal of its previous position,” The Block noted.
Lawmakers and the crypto industry argue that digital asset firms face distinct challenges in securing and maintaining bank accounts in the U.S. Last week, the Senate Banking Committee voted along party lines to advance a bill that removes references to reputational risk as a factor in federal regulators' oversight of financial institutions, with no Democrats supporting the measure, The Block explained.
The bill, introduced by Senate Banking Committee Chair Tim Scott (R-SC), also addresses other reputational risks, including those affecting "disfavored political groups." The Federal Reserve defines reputational risk as the "potential that negative publicity regarding an institution's business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions," The Block added.