WASHINGTON–In a letter sent to NCUA Chairman Kyle Hauptman, America’s Credit Unions is asking NCUA to consider excluding references to reputational risk from supervisory exam programs and to provide parity with banks in the wake of the Federal Reserve Board’s Monday announcement that it will no longer consider reputational risk in bank supervision.
The trade group noted NCUA currently considers reputational risk as part of its CAMELS rating system, under the “M,” or management, component.
“Given the potential for reputational risk to be abused to discourage otherwise lawful activities, updating the NCUA’s supervisory materials to reflect a more objective, financially-oriented analysis of quantifiable harm would better serve the credit union industry,” reads the letter, which was signed by ACU’s head of regulatory advocacy, James Akin.
Recommendations Made
The letter recommends NCUA work with Federal Reserve supervisory staff to understand how more specific discussion of financial risk can be used in lieu of more ambiguous references to reputational injury. America’s Credit Unions said NCUA should then offer credit unions an opportunity to comment on proposed revisions to its supervisory materials that had previously referenced reputational risk.
