The US Federal Deposit Insurance Corporation (FDIC) plans to remove the category 'reputational risk' from its bank supervision framework. This decision was outlined in a letter sent by FDIC's acting chairman Travis Hill to Representative Dan Meuser.
Changes in Bank Supervision
In response to a letter from lawmakers with recommendations on digital asset rules, the FDIC has completed a 'review of all mentions of reputational risk' in its regulations and policy documents and plans to remove this concept from its regulatory approach.
Issues of Reputational Risk
According to the Federal Reserve's definition, reputational risk is 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.
Impact on Crypto Industry
The letter also addressed digital assets, with Hill noting that the agency has generally been 'closed for business' for institutions interested in blockchain or distributed ledger technology. Now, the FDIC is working on a new digital asset policy aiming to provide banks a way to engage with these assets.
These changes may strengthen the position of the crypto industry by making it more accessible to banking institutions and could lead to shifts in financial strategies in the long term.
