Bankers and experts had considered the reputational risk component of bank examinations vague and unfair

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Reputational risk meant banks could get flagged by regulators even if they followed the law, just because something they did might upset the public or attract negative media. For years, banks complained that this rule was too vague and unfair. Now, the Fed’s new plan will remove all mentions of this risk from official manuals and documents used during inspections.

Together, the three regulators oversee every federally insured depository institution. Their coordinated revisions eliminate a subjective standard that experts said allowed examiners to block banking services to crypto firms.