ICBA Statement on Chairman Hensarling’s Inquiry on Regulator Use of Reputational Risk in Bank Supervision

Washington, D.C. (May 23, 2014)—Independent Community Bankers of America® (ICBA) President and CEO Camden R. Fine today released this statement following House Financial Services Committee Chairman Jeb Hensarling’s letters to federal banking regulators about his concerns with using reputational risk in supervising depository institutions.

 “ICBA shares Chairman Hensarling’s concerns with using subjective judgments such as reputational risk in the supervision of depository institutions, including community banks. While objective ratings systems such as CAMELS rely on hard data and support fair and even standards of supervision, relying on supervisors’ judgments of an institution’s reputation pose the threat of vague, uneven and arbitrary regulation.

“ICBA is concerned that applying subjective factors such as reputational risk in safety-and-soundness examinations will allow regulators and law enforcers to pressure financial institutions to sever relationships with legal businesses that are out of favor with some policymakers or to terminate certain types of products or services. The association is similarly concerned with excessive overreach of the Justice Department’s ‘Operation Choke Point’ initiative, which holds financial institutions and payment processors responsible for the actions of companies engaged in legal activities that some policymakers oppose, which could have unintended and costly consequences for consumers.

“Community bankers have always been in the best position to determine the necessary measures needed to protect their hard-earned reputations. Safety and soundness—a hallmark of community banks—should be measured in verifiable data, not subjective standards that could vary from one examiner to the next. ICBA looks forward to seeing how federal banking regulators respond to Chairman Hensarling’s inquiry and to continuing to work with Congress and the regulators to address our mutual concerns.”

For more information, visit www.icba.org.


About ICBA
The Independent Community Bankers of America®, the nation’s voice for more than 6,500 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services.