The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have released a joint notice of proposed rulemaking to formally remove reputation risk from their supervisory programs.

The proposal outlines a definition for “reputation risk” and seeks to prevent the agencies from taking negative actions or issuing criticisms against financial institutions based solely on this type of risk. It also aims to prohibit regulators from instructing or encouraging banks to close customer accounts, or take other measures, due to an individual’s or entity’s political, social, cultural, or religious views, constitutionally protected speech, or participation in lawful business activities that may be politically disfavored but are legal.

According to the agencies, “The proposed rule would define ‘reputation risk’ and prohibit the agencies from criticizing or taking adverse action against an institution on the basis of reputation risk. The proposed rule would also prohibit the agencies from requiring, instructing, or encouraging an institution to close customer accounts or take other actions on the basis of a person or entity’s political, social, cultural, or religious views or beliefs, constitutionally protected speech, or solely on the basis of politically disfavored but lawful business activities perceived to present reputation risk.”

The agencies noted that this move addresses concerns raised in Executive Order 14331—Guaranteeing Fair Banking for All Americans—which stated that reputation risk could be used as a justification for limiting access to banking services for individuals and businesses based on their beliefs or legal business operations.

Public comments on this proposal will be accepted for 60 days following its publication in the Federal Register.