Fed Drops ‘Reputational Risk’ Checks in Bank Reviews, Potential Implications for Crypto

The Federal Reserve has eliminated 'reputational risk' assessments from its bank examination framework, shifting focus solely to financial, operational, and legal risks. This regulatory pivot removes subjective evaluation of how public perception might impact institutions—a change that could indirectly benefit crypto-friendly banks previously scrutinized for digital asset exposure.

Bank examiners will now rely exclusively on quantifiable risk metrics, retraining to ensure uniform application across all supervised institutions. While the Fed maintains that risk management standards remain unchanged, the MOVE effectively delegates reputation-related decisions to individual banks' discretion.

The policy shift arrives as major financial institutions increasingly explore cryptocurrency custody, trading, and blockchain solutions. By decoupling regulatory oversight from subjective reputation concerns, the Fed may have inadvertently reduced bureaucratic friction for banks engaging with digital assets—though compliance requirements for anti-money laundering and capital reserves remain firmly in place.