The NCUA announced Thursday that it will no longer use reputational risk or similar concepts in its examination and supervisory processes. The move followed President Donald Trump's Executive Order 14331, which requires regulators to eliminate standards that could enable politicized or unlawful “debanking.”
Under the change, NCUA examiners will no longer cite or discuss reputational risk when evaluating credit unions or credit union service organizations. Instead, the agency will continue to assess areas traditionally linked to reputational concerns, such as financial liabilities from litigation or insider abuse, under more defined categories.
In addition, the NCUA has discontinued assigning ratings to its longstanding Risk Categories, which included credit, interest rate, liquidity, transaction, compliance, reputation and strategic risk.
The agency said this change responds to industry feedback through AskNCUA and direct recommendations to Chairman Kyle Hauptman.
The NCUA emphasized that the revisions will not materially alter the outcome of credit union examinations. Reports will instead focus more directly on CAMELS ratings and material supervisory concerns, creating what the agency described as a more streamlined and transparent process.
The agency has begun updating its regulations, manuals and training to remove references to reputational risk. It also issued a Letter to Credit Unions superseding prior guidance.
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