Banks, regulators should focus on reputational risks-Raskin

WASHINGTON Thu Feb 28, 2013 12:34pm EST

WASHINGTON Feb 28 (Reuters) - Banks and their regulators should identify and address potential threats to banks' reputations as they look to introduce new products and services in the Internet age, a Federal Reserve official said on Thursday.

Fed Governor Sarah Bloom Raskin said in remarks prepared for a banking conference in Atlanta that banks' role in the 2007-2009 U.S. financial crisis battered the reputations of many firms, and the industry as a whole, in the eyes of many consumers.

As Americans increasingly use social media sites such as Facebook and Twitter, customer complaints about banks can be amplified and could hurt their performance, she said.

Raskin cited the 2011 drama over a planned $5 debit-card fee at Bank of America, which was partly fueled by backlash on social media, as an example of the way consumer reactions could hurt banks' reputations.

"A substantial portion of a bank's enterprise value comes from intangible assets such as brand recognition and customer loyalty that may not appear on the balance sheet but are nevertheless critical to the bank's success," Raskin said.

"But when a bank already suffers from a poor reputation...it likely will face difficulties in introducing new fee-generating products or activities without inviting further criticism and damage to its reputation," she said.

Raskin said cybersecurity threats, particularly after several large banks' websites were hacked last year, represent some of the biggest risks today as they could create dissatisfaction among consumers or drive down confidence in institutions.

Significant work is under way to curb such risks, she said.

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