FDIC Encourages a Risk-Based Approach in Assessing Customer Relationships, from Risk Management Blog.
In a January 28, 2015 Financial Institution Letter (FIL), the FDIC attempted to further publicly clarify its position regarding the propriety of banks offering individual customer relationships to particular categories of business customers. Earlier guidance had included a list of “risky” merchant categories (payday lenders, coin dealers, firearms sales, and money transfer networks were a few) and FDIC examiners had raised objections to some bank customer relationships merely because the customers fell within these categories. When bankers terminated such relationships or refused to initiate them, businesses within these categories cried foul. Congressional attention was drawn to both the guidance and examiner actions based upon the guidance. The FDIC subsequently issued revised guidance in July 2014 that withdrew the “risky” merchant list and contained language emphasizing that banks that properly manage customer relationships are neither prohibited nor discouraged from providing services to any customer operating in compliance with applicable law.
Apparently, the 2014 revised guidance proved insufficient either to satisfy bankers that their customer relationships would not be criticized or to persuade some examiners not to criticize such relationships involving legitimate businesses. The new FIL guidance, entitled a “Statement on Providing Banking Services,” contains several key points:
* The FDIC encourages insured institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers without regard to the risks presented or the bank’s ability to manage the risk.