In response to questions raised by an investigation into the FDIC's Operation Choke Point, NCUA Board Chairman Debbie Matz said the NCUA does not directly consider reputation risk in its supervisory actions.
"The NCUA does evaluate seven key risks to evaluate a credit union's overall risk under the CAMEL rating system. Four of the key risks – reputation risk, along with transaction risk, strategic risk and compliance risk – are difficult to quantify," Matz wrote to House Financial Services Chairman Jeb Hensarling (R-Texas).
"The NCUA expects examiners to consider current and prospective performance indicators, both quantitative and qualitative, in forming their conclusions about CAMEL ratings," she added.
In a letter sent to the NCUA last month, Hensarling said he was concerned some regulators may be relying on subjective judgments of what constitutes reputation risk.
The Operation Choke Point initiative was made public after a payday lender and payday lending trade association sued banking regulators, claiming they had pressured banks into cutting off their services by citing reputation risk as an exam exception.
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