FDIC and OCC Finalize Rule Eliminating “Reputation Risk” from Bank Supervision
The Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) have issued a joint final rule removing “reputation risk” as a factor in bank supervision, marking a significant shift in regulatory policy.
The rule formally prohibits regulators from criticizing or taking adverse action against financial institutions based on perceived reputational risk. It also bars agencies from encouraging or pressuring banks to close accounts or restrict services based on a customer’s political, social, cultural, or religious views—or participation in lawful but potentially controversial industries.
Regulators framed the move as an effort to eliminate subjectivity from supervision and refocus oversight on measurable financial risks such as credit, liquidity, and operational soundness. Officials have argued that “reputation risk” has historically been inconsistently applied and, in some cases, used as a pretext for discouraging banks from serving certain lawful customers or sectors.
The rule also implements priorities outlined in Executive Order 14331, “Guaranteeing Fair Banking for All Americans,” which raised concerns about so-called “debanking”—the denial of financial services based on political or ideological considerations rather than financial risk.
Importantly, the rule applies to regulators, not banks themselves. Financial institutions remain free to make their own business decisions regarding customer relationships, including considering reputational concerns, so long as those decisions are not the result of supervisory pressure.
The change represents a broader recalibration of federal banking oversight under the Trump administration, with regulators moving away from more expansive supervisory concepts toward a narrower focus on statutory mandates and quantifiable risk. Additional alignment across agencies may follow, as the Federal Reserve has proposed a similar rule but has not yet finalized it.
