Law.com Quotes Michael Anderson on Reputational Risk as a Banking Regulatory Metric

A recent Law.com article examines a proposed Trump Administration regulation that would prohibit federal agencies from considering reputational risk as a supervisory category in banking regulation. Smith Anderson attorney Michael Anderson weighed in on the potential implications for financial institutions.

The article explains that Federal regulators have proposed eliminating reputational risk as a formal supervisory metric, particularly in examinations tied to money laundering and Bank Secrecy Act (BSA) compliance. While some argue reputational considerations have been misapplied or “abused,” others caution that removing it entirely may overlook real risks tied to engaging with high-risk clients or industries. Michael underscored that reputational exposure will persist regardless of regulatory treatment.

"Reputational harm will remain a real concern for financial institutions, even if it ceases to be a regulatory metric," Michael noted. "Banks must navigate the risk even without direct regulatory oversight," adding that the proposal appears designed to ensure reputational risk is "truly removed as a regulatory metric, and that it does not slip back in under some other name."

This latest commentary builds on a July article, "Feds Shift on Reputational Risk Raises Questions for Banks," that Michael co-authored with Smith Anderson attorneys Hunter Bruton and Andrew Benton, which explored how evolving federal guidance on reputational risk is reshaping bank governance and risk assessment frameworks. Their insights highlight a critical tension: even as regulators step back, market and stakeholder expectations may continue to hold banks accountable.

Michael focuses his practice on business litigation with extensive experience in complex civil litigation and government enforcement matters. Prior to joining Smith Anderson, he served as Chief of the Civil Division for the U.S. Attorney’s Office for the Eastern District of North Carolina, where he oversaw investigations and litigation of a wide range of civil matters, including False Claims Act cases, Controlled Substances Act enforcement, employment discrimination, torts and bankruptcy. His combined government and private practice experience provides clients with valuable insight into internal and government investigations, federal regulatory scrutiny and high-stakes litigation.