The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation jointly announced on Apr. 7 a final rule that removes reputation risk as a factor in their supervisory programs.
The agencies said this new rule defines “reputation risk” and prohibits regulators from criticizing or taking adverse action against financial institutions based solely on that concept. The rule also bars the agencies from instructing or encouraging banks to close customer accounts or take other actions due to an individual’s political, social, cultural, or religious views, constitutionally protected speech, or because they are involved in lawful but politically disfavored business activities perceived as presenting reputation risk.
According to the agencies, these changes respond directly to concerns raised by Executive Order 14331, Guaranteeing Fair Banking for All Americans. That order warned that invoking reputation risk could serve as a pretext for limiting access to financial services for law-abiding individuals and businesses based on their beliefs or lawful business activities.
The final rule aims to ensure that regulatory supervision is focused on objective safety and soundness criteria rather than subjective reputational considerations. By codifying these requirements, the agencies intend to prevent discrimination against customers whose activities are legal but may be viewed unfavorably by some segments of society.
Looking ahead, regulators say this move will support fairer access to banking services and reinforce protections for free expression within financial oversight.
