Monthly LRA Update

REGULATORY DEVELOPMENTS

Reputational Risk in Supervisory Oversight

On March 6 Senate Banking Committee Chairman Tim Scott (R-SC) introduced legislation that would require the Federal banking regulators to remove reputational risk from any regulations, examinations and supervisory guidance. In the press release, Senator Scott indicated that the concept had caused legitimate businesses to be debanked (i.e., not have access to banking services).

In a related development, on March 24 FDIC Acting Chair Travis Hill sent a letter to Rep. Dan Meuser (R-PA) addressing the FDIC’s approach to digital assets and bank supervision. In the letter, he expressed agreement with the view that the FDIC should not use “reputational risk” as a basis for supervisory criticism. While acknowledging the importance of reputation, Mr. Hill observed that “most activities that could threaten a bank’s reputation do so through traditional risk channels (e.g., credit risk, market risk, etc.).”

He further noted that the FDIC has conducted a review of all mentions of reputational risk in its regulations, guidance and other documents, and that the FDIC plans to remove the concept from its regulatory approach.

These developments are not directly related to BOLI. However, Reputation Risk is one of the specified risk factors addressed in the interagency regulatory guidance for BOLI (commonly referenced as OCC 2004-56).

OTHER DEVELOPMENTS

NAIC Announces 2025 Federal Legislative and Regulatory Priorities

On March 21 the NAIC announced its 2025 federal legislative and regulatory priorities. None of the priorities appear to be focused on matters relating directly to the life insurance industry. Notable items include elimination of the Federal Insurance Office (FIO), addressing catastrophic risk from natural disasters, and promoting state-run health insurance markets.