(Feb 24): The Federal Reserve unveiled a new proposal that further targets how examiners scrutinise banks’ risk after US President Donald Trump moved to rein in what he sees as the closing of customer accounts for unfair reasons.
The new plan, which is subject to public consultation, would seek to explicitly prohibit examiners from “penalising or prohibiting” a firm from banking a customer engaged in legal activity. Instead, bank examinations should prioritize risks that threaten bank safety and soundness.
“We have heard troubling cases of debanking — where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their political views, religious beliefs, or involvement in disfavoured but lawful businesses,” Fed vice-chair for supervision Michelle Bowman said in a statement.
The Fed had said last year it would no longer consider reputation risk as part of its bank exams, following calls from some bank groups and Republican lawmakers to end the practice.
The central bank said on Monday the new proposal would codify that move.
Uploaded by Isabelle Francis
