Fed Requests Comment On Plan To Remove Reputation Risk From Supervision Of Banks

The Federal Reserve is requesting comments on a proposal to remove reputation risk from the supervision of banks it oversees. Comments on the Fed proposal are due April 27, 2026.

"We have heard troubling cases of debanking—where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their political views, religious beliefs, or involvement in disfavored but lawful businesses," Vice Chair for Supervision Michelle W. Bowman said in a statement. "Discrimination by financial institutions on these bases is unlawful and does not have a role in the Federal Reserve's supervisory framework."

The Fed has defined reputation risk as "the potential that negative publicity regarding an institution's business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions."

On August 7, President Trump signed Executive Order 14331, "Guaranteeing Fair Banking for All Americans." This sweeping action provides that financial institutions of any size may not deny services to individuals or businesses based on political or religious beliefs, orientation, or lawful industry involvement.

The Executive Order directs banking agencies to adopt policies to ensure that financial institutions do not use reputation risk as a basis for restricting access to banking services.

The Fed announced in June 2025 that reputation risk would no longer be a component of its examination programs and that it would train examiners to help ensure that the changes are implemented consistently.

The proposal would ensure that supervisory decisions are based on material and financial risks, according to the Fed. The Fed also states that the proposal is intended to provide greater clarity and "facilitate greater precision in supervisory decision making."

The Fed added that the proposed change "does not alter the expectation that banks maintain strong risk management to ensure safety and soundness and compliance with law and regulation."

The proposal would prohibit the Fed from encouraging or compelling Fed-supervised banking organizations to deny or place conditions on the provision of banking or other financial services based on an individual's or business's:

• Constitutionally protected political or religious beliefs, associations or conduct.
• Involvement in politically disfavored but lawful activities perceived to present reputation risk.

The FDIC, the OCC and the NCUA have announced their intention to eliminate references to reputation risk in their supervisory materials and have recently requested comments on proposals to codify the removal of reputation risk from their supervisory materials.

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