On October 21, 2025, the National Credit Union Administration (NCUA) announced a proposed rule to formally remove "reputation risk" from its supervisory framework under the Federal Credit Union Act. The proposal would amend Parts 702 and 791 of the NCUA's regulations to prohibit the agency from taking adverse action against a federally insured credit union based on reputation risk.
The NCUA explained that reputation risk is subjective, difficult to measure, and has not been shown to impact the National Credit Union Share Insurance Fund. Examiners will instead focus on quantifiable risks such as credit, liquidity, and operational risk. The rule would also bar the agency from urging institutions to deny or terminate services based on political, social, cultural, or religious views, constitutionally protected speech, or other lawful but disfavored activities.
Key provisions of the rule include:
- Prohibition on adverse action. The NCUA may not criticize or downgrade an institution, or impose supervisory conditions, based on reputation risk.
- Limits on examiner influence. Examiners cannot require or encourage institutions to close, deny, or alter relationships with members or service providers due to reputation risk or disfavored lawful activities.
- Regulatory amendments. The proposal removes "reputational" from the complex credit union stress-testing rule and adds a new Subpart E to Part 791 codifying these prohibitions.
Putting It Into Practice: Federal regulators continue to eliminate subjective risk factors from their supervisory framework (previously discussed here and here). Credit unions should review supervisory correspondence and internal compliance protocols to ensure alignment with this evolving approach.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
