Federal Reserve Requests Comment on Proposal to Codify Removal of Reputation Risk

Fed Banking Regulation

Published February 23rd, 2026

Detected March 14th, 2026

Summary

The Federal Reserve Board is requesting public comment on a proposal to codify the removal of reputation risk from its bank supervision framework. This action follows earlier decisions to exclude reputation risk and aims to ensure supervisory decisions focus on material financial risks.

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What changed

The Federal Reserve Board has issued a proposal to formally codify the removal of reputation risk from its supervisory framework for banks. This action builds upon the Board's June 2025 announcement and seeks to prevent supervisors from pressuring financial institutions to 'debank' customers based on political views, religious beliefs, or involvement in lawful but disfavored businesses. The proposal emphasizes that supervisory decisions should be based on material financial risks, thereby increasing clarity and precision in decision-making.

Regulated entities, particularly banks, should review the proposal and consider submitting comments. The comment period is open for 60 days following publication in the Federal Register. While this change focuses on supervisory methodology, banks are reminded that they must still maintain strong risk management for safety, soundness, and regulatory compliance. The proposal does not alter expectations regarding these core risk management functions.

What to do next

Review the Federal Reserve's proposal to codify the removal of reputation risk from bank supervision.
Submit comments to the Federal Reserve within 60 days of publication in the Federal Register.

Source document (simplified)

Press Release

February 23, 2026

Following earlier actions to remove reputation risk from its supervision of banks, Federal Reserve Board requests comment on proposal to codify that removal

For release at 5:00 p.m. EST

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- Following earlier actions to remove reputation risk from its supervision of banks, the Federal Reserve Board on Monday requested comment on a proposal to codify that removal. The proposal reiterates the Board's policy against penalizing or prohibiting an institution from banking a customer engaged in legal activity.

"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," said Vice Chair for Supervision Michelle W. Bowman. "Discrimination by financial institutions on these bases is unlawful and does not have a role in the Federal Reserve's supervisory framework."

In June, the Board announced that reputation risk would no longer be a component of examination programs in its supervision of banks. This proposal would build on that announcement to help ensure supervisory decisions are based on material financial risks, as well as increase clarity and facilitate greater precision in supervisory decision making. It would also support the Board's focus on core financial risk in its supervision of banks.

This change does not alter the Board's expectation that banks maintain strong risk management to ensure safety and soundness and compliance with law and regulation.

Comments are due within 60 days after publication in the Federal Register.

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