Washington D.C. – In a major crackdown on reputation risk, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (the agencies) have issued a joint notice of proposed rulemaking to codify the elimination of reputation risk from their supervisory programs.
According to sources, 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.
This proposed rulemaking is in response to concerns expressed in Executive Order 14331, Guaranteeing Fair Banking for All Americans, that the use of reputation risk can be a pretext for restricting law-abiding individuals’ and businesses’ access to financial services on the basis of political or religious beliefs or lawful business activities.
The proposed rule is seen as a major victory for advocates of fair banking practices, who have long argued that reputation risk has been used as a tool to discriminate against marginalized communities and individuals.
Comments on the proposed rule are due 60 days after the date of publication in the Federal Register. The agencies will accept written comments from interested parties until then.
FDIC spokesperson Brian Sullivan and OCC spokesperson Stephanie Collins are available for comment on this proposed rulemaking.
In a statement, Sullivan said, “This proposed rule is a critical step in ensuring that financial institutions are held to the highest standards of fairness and equality.” Collins added, “We are committed to protecting the rights of law-abiding individuals and businesses and ensuring that they have access to financial services regardless of their background or beliefs.”
The proposed rule is expected to have far-reaching implications for the financial industry and will be closely watched by regulators, financial institutions, and advocacy groups.
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Key Facts
- Agency: FDIC
- Category: Fraud & Financial Crimes
- Source: Official Source â†â€â€ÂÂ
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