WASHINGTON--America’s Credit Unions and the Defense Credit Union Council voiced support for NCUA’s proposed rule to formally eliminate “reputation risk” from its supervisory and examination program, noting the concept is ambiguous and lacks any measurable criteria and therefore is inappropriate to use as a risk factor.
America’s Credit Unions had requested the exclusion of reputational risk in a letter to Chairman Kyle Hauptman in June.
In a letter sent Monday, Regulatory Affairs Counsel Tyler Maron said removing reputation risk would reduce regulatory burden, exam time, and costs—especially for smaller credit unions—and refocus exams on objective and measurable material financial and operational risks tied to safety and soundness.
Maron also affirmed that credit unions do not debank members based on protected speech or viewpoints and stressed that institutions must retain the ability to make risk-based business decisions without examiner interference. He urged the NCUA to ensure the rule does not allow examiners to penalize credit unions for policies and procedures that allow them to debank for risk-based reasons.
“We urge that credit unions must be able to continue to enact independent policies, procedures, and judgments without interference by NCUA examiners,” added Maron.
DCUC'S Letter
Separately, the Defense Credit Union Council wrote to NCUA also supporting the agency’s proposed rule to codify the elimination of reputation risk from its supervisory and examination program.DCUC expressed strong support for the proposed rule, noting sound policy improves the efficiency, clarity, and fairness of credit union supervision while aligning with recent executive directives aimed at preventing politicized or unlawful debanking.
“Reputation risk is inherently subjective and difficult to measure consistently, which can lead to uncertainty and inconsistent supervision,” said Jason Stverak, DCUC chief advocacy officer. “We commend the NCUA for removing reputation risk from its supervisory framework and for proposing to codify this change. We believe it promotes further transparency, predictability, and fairness while ensuring examiners remain focused on objective safety and soundness risks.”
In its comments, DCUC shared that its members operate in highly regulated environments and have extensive experience with NCUA examinations. DCUC agreed with the agency’s assessment that reputation risk lacks concrete metrics and can divert resources away from core financial risks such as credit, liquidity, and interest rate risk. DCUC also supported the proposed definitions of “reputation risk” and “adverse action,” stating they provide needed clarity for both examiners and credit unions. DCUC encouraged NCUA to pair the final rule with examiner training and industry outreach to ensure consistent implementation across regions.
“We recommend that the NCUA issue clear written guidance, host an industry webinar following finalization of the rule, and create a centralized webpage summarizing recent supervisory and regulatory changes. Doing so will ensure credit unions have the assistance and support they need when it comes to compliance and implementation,” added Stverak.
Endangered Small Credit Union Defense Comments
Doug Wadsworth, president of the Endangered Small CU Defense, told CUToday.info his group supports the action by NCUA."On behalf of the Endangered Small Credit Union Defense, an nonprofit social welfare advocacy representing 18 small credit unions, we will benefit from these proposed rules, because there will be greater consistency and predictability in examinations.," wrote Wadsworth in a comment letter to the agency. "The removal of reputation risk from the supervisory framework will reduce uncertainty because NCUA examiners will now focus on concrete, measurable core financial and operational risks rather than subjective perceptions that are inherent in reputational risk assessments. We also believe it is very appropriate that the NCUA is prohibited from requiring a credit union to close an account or to refrain from providing an account, product, or service based on political, social, cultural, or religious views and beliefs, constitutionally protected speech, or bias against lawful, but politically disfavored, businesses."