BRIDGEWATER, N.J.—Investment firm Olden Lane is urging the National Credit Union Administration to balance clarity with caution as the agency moves forward with its proposal to remove reputational risk as an explicit supervisory criterion for federally insured credit unions.
In a detailed comment letter, the New Jersey-based boutique investment bank said it supports the NCUA’s attempt to simplify and modernize the supervisory framework but warned that eliminating reputational risk entirely could unintentionally weaken oversight of ethical conduct, governance and member trust.
Olden Lane, headquartered in Bridgewater, operates a FINRA- and SEC-registered broker-dealer and is best known for structuring subordinated debt for credit unions. The firm said it has helped more than 60 institutions secure over $1 billion in subordinated debt approvals since 2019 and increasingly advises credit unions on mergers, acquisitions and growth strategies amid industry consolidation.
Support for the Rule, With Reservations
Olden Lane said the proposed rule “beneficially recalibrates” the supervisory landscape and better aligns the examination regime with measurable, quantifiable safety-and-soundness metrics such as capital, asset quality, earnings, liquidity and governance. Reputational risk, the firm noted, has long been viewed as amorphous and inconsistently applied.
The agency’s proposal, the firm wrote, also acknowledges that eliminating reputational risk does not limit a credit union’s ability to make member-driven business decisions or manage third-party relationships consistent with safety and soundness. That shift, Olden Lane said, reinforces confidence in credit union governance and reflects the mission-driven nature of the cooperative system.
A Note of Caution
But the investment firm cautioned that reputational considerations often serve as early indicators of deeper cultural, conduct or leadership failures that may not surface in traditional ratio-based assessments. Scandals and governance breakdowns, Olden Lane argued, can rapidly erode member confidence and trigger financial stress—even if the fallout occurs after the fact.
The firm suggested the NCUA consider retaining a refined, narrowly tailored version of reputational risk as a “backstop” indicator in rare cases involving emerging misconduct or major strategic shifts. But Olden Lane acknowledged that such an approach may conflict with the directives of Executive Order 14331, which instructs federal banking regulators to remove reputational-risk concepts that could be used in “politicized or unlawful debanking.”
Calls for Clear Transition Guidance
Olden Lane urged the NCUA to issue detailed guidance explaining how supervisory expectations will change once reputational risk is removed from the formal criteria. The firm warned that, without clarity, some institutions may misinterpret the change as a signal to downgrade conduct-risk or brand-integrity efforts.
The firm recommended interpretive guidance—potentially through the Supervisory Manual—clarifying circumstances in which reputational considerations may still arise implicitly under other categories. It also urged the agency to outline how credit unions should demonstrate continued commitment to strong governance, ethical standards and member-trust practices in the absence of a formal reputational-risk element.
Encouraging Best Practices
The comment letter stressed that credit unions should not view the rule change as license to relax governance or transparency standards. Olden Lane suggested the NCUA encourage institutions to adopt their own voluntary reputational-risk frameworks—outlining metrics, reporting policies and crisis-management protocols—and allow examiners to consider those frameworks where appropriate.
The firm also cautioned that the rule’s broad definitions of “adverse action” and “doing business with” could unintentionally limit the regulator’s ability to offer informal feedback that credit unions depend on. Olden Lane recommended a “safe harbor” allowing credit unions to seek supervisory opinions that may involve subjective judgments without running afoul of the new prohibitions.
Scalability, Proportionality and Monitoring
Olden Lane said reputational oversight should ideally account for the size, complexity and mission of individual credit unions. A small community credit union with simple products, for example, may require minimal reputational-risk evaluation, while a large, diversified institution may warrant more explicit monitoring. However, the firm conceded that such tiering might not be feasible under executive-order constraints and could add unnecessary complexity.
The comment letter also urged the NCUA to build a mechanism for retrospective review. By periodically assessing whether the elimination of reputational risk affects member trust, public confidence or the agency’s responsiveness to conduct-risk events, the regulator could determine whether future adjustments are warranted. Such a process, Olden Lane said, would help reassure stakeholders but may be difficult to execute under the executive-order framework.
‘Welcome Modernization’
Olden Lane called the NCUA proposal a “welcome modernization” that removes a subjective supervisory tool susceptible to misunderstanding or misuse. The firm said it appreciates the agency’s recognition that reputation is intertwined with governance and culture, rather than a standalone category.
Still, the firm urged the NCUA to incorporate safeguards—clear guidance, voluntary best-practice frameworks, and attention to conduct risk—to prevent credit unions from weakening member-focused standards. The investment bank said it supports the proposal but asked the agency to consider improvements to protect the integrity and public confidence of the credit union system.
“We look forward to the adoption of the rule,” the firm wrote, while encouraging continued dialogue to ensure credit unions remain held to the “highest standards of integrity, member focus and public confidence.”
