Prohibition on the Use of Reputation Risk by Regulators (final rule; effective 2026-06-09), 91 FR 18279, FR Doc 2026-06947 (Part 1 of 2)
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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations 18279
implementing regulations as written at Congressional Review Act DEPARTMENT OF THE TREASURY
that time. Based on the comments
received, we have no reason to believe Pursuant to the Congressional Review Office of the Comptroller of the
this categorical exclusion was in error. Act (5 U.S.C. 801 et seq.), the Office of Currency
Therefore, for the reasons given in the Information and Regulatory Affairs
proposed rule and in this document, we designated this rule as not a major rule, 12 CFR Parts 1, 4, and 30
are adopting the proposed rule as a final as defined by 5 U.S.C. 804(2).
[Docket ID OCC–2025–0142]
rule, without change. Paperwork Reduction Act
RIN 1557–AF34
Executive Order 12866, Executive
Order 14192, and Regulatory Flexibility This final rule contains no new
reporting or recordkeeping requirements FEDERAL DEPOSIT INSURANCE
Act CORPORATION
under the Paperwork Reduction Act of
This rule does not meet the criteria of 1995 (44 U.S.C. 3501 et seq.). Further,
a ‘‘significant regulatory action’’ under 12 CFR Parts 302 and 364
this rule will reduce the reporting and
Executive Order 12866, as amended by recordkeeping requirements in 9 CFR RIN 3064–AG12
Executive Orders 14215 and 13563. 93.314.
Therefore, the Office of Management Prohibition on the Use of Reputation
and Budget (OMB) has not reviewed this List of Subjects in 9 CFR Part 93 Risk by Regulators
rule under those orders. This regulation
is also not a ‘‘regulatory action,’’ as the Animal diseases, Imports, Livestock, AGENCY: Office of the Comptroller of the
meaning of that term is set forth in Poultry and poultry products, Reporting Currency, Treasury, and Federal Deposit
Executive Order 14192 and and recordkeeping requirements. Insurance Corporation.
implementing guidance. Accordingly, we are amending 9 CFR ACTION: Final rule.
Under the Regulatory Flexibility Act part 93, subpart C, as follows: SUMMARY: The Office of the Comptroller
(RFA) (5 U.S.C. 601–612) (as amended
by the Small Business Regulatory PART 93—IMPORTATION OF CERTAIN of the Currency and the Federal Deposit
Enforcement Fairness Act (SBREFA) of Insurance Corporation are adopting a
ANIMALS, BIRDS, FISH, AND
1996; 5 U.S.C. 601 et seq.), agencies final rule to codify the elimination of
POULTRY, AND CERTAIN ANIMAL,
must prepare and make available for reputation risk from their supervisory
BIRD, AND POULTRY PRODUCTS; programs. Among other things, the rule
public comment a regulatory flexibility REQUIREMENTS FOR MEANS OF
analysis that describes the effect of the prohibits the agencies from criticizing or
CONVEYANCE AND SHIPPING taking adverse action against an
rule on small entities (i.e., small CONTAINERS
businesses, small organizations, and institution on the basis of reputation
small government jurisdictions). No risk. The rule also prohibits the agencies
■ 1. The authority citation for part 93 from requiring, instructing, or
regulatory flexibility analysis is continues to read as follows:
required, however, if the head of an encouraging an institution to close an
agency or an appropriate designee Authority: 7 U.S.C. 1622 and 8301–8317; account, to refrain from providing an
certifies that the rule will not have a 21 U.S.C. 136 and 136a; 31 U.S.C. 9701; 7 account, product, or service, or to
significant economic impact on a CFR 2.22, 2.80, and 371.4. modify or terminate any product or
substantial number of small entities. service on the basis of a person or
§ 93.314 [Amended] entity’s political, social, cultural, or
APHIS has concluded and hereby
certifies that this rule will not have a religious views or beliefs,
■ 2. Amend § 93.314 by removing
significant economic impact on a constitutionally protected speech, or
paragraph (a)(5), and redesignating solely on the basis of politically
substantial number of small entities; paragraphs (a)(6) and (a)(7) as
therefore, an analysis is not included. disfavored but lawful business activities
paragraphs (a)(5) and (a)(6), perceived to present reputation risk.
This recission rule will only have minor respectively.
and beneficial impacts on small entities The rule further forbids the agencies
engaged in the importation of equines Done in Washington, DC, this 31st day of from taking any supervisory action or
by removing a requirement that has March 2026. other adverse action against an
proven logistically difficult to Kelly Moore, institution, a group of institutions, or
implement consistently. This recission the institution-affiliated parties of any
Administrator, Animal and Plant Health
rule will have a beneficial effect on Inspection Service.
institution that is designed to punish or
these small entities, lowering costs discourage an individual or group from
[FR Doc. 2026–06955 Filed 4–9–26; 8:45 am]
related to paperwork and otherwise engaging in any lawful political, social,
BILLING CODE 3410–34–P
improving regulatory compliance with cultural, or religious activities,
the remaining provisions of the constitutionally protected speech, or, for
regulations. political reasons, lawful business
activities that the agencies or its
Executive Order 12988 personnel disagree with or disfavor.
This final rule has been reviewed DATES: The final rule is effective June 9,
under Executive Order 12988, Civil 2026.
Justice Reform. This rule: (1) Preempts FOR FURTHER INFORMATION CONTACT:
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all State and local laws and regulations OCC: Jonathan Fink, Director, Bank
that are inconsistent with this rule; (2) Advisory, Joanne Phillips, Counsel, or
has no retroactive effect; and (3) does Collin Berger, Attorney, Chief Counsel’s
not require administrative proceedings Office, (202) 649–5490, Office of the
before parties may file suit in court Comptroller of the Currency, 400 7th
challenging this rule. Street SW, Washington, DC 20219. If
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18280 Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations
you are deaf, hard of hearing, or have a Under 12 U.S.C. 1(a), the OCC is financial services on the basis of
speech disability, please dial 7–1–1 to charged with assuring the safety and political or religious beliefs or lawful
access telecommunications relay soundness of and compliance with laws business activities.
services. and regulations, fair access to financial The agencies’ supervisory experience
FDIC: Legal Division: Sheikha Kapoor, services, and fair treatment of customers has shown that the use of reputation
Assistant General Counsel, (202) 898– by the institutions and other persons risk in the supervisory process does not
3960; James Watts, Counsel, (202) 898– subject to its jurisdiction. Similarly, the increase the safety and soundness of
6678. FDIC has statutory authority to
supervised institutions because
SUPPLEMENTARY INFORMATION:
administer the affairs of the
supervisors have little ability to predict
Corporation, which includes a
I. Introduction ex ante whether or how certain
framework for banking supervision.
activities or customer relationships
On October 30, 2025, the Office of the Further, the FDIC’s Board of Directors
present reputation risks that could
Comptroller of the Currency (OCC) and has the authority to prescribe rules and
regulations as it may deem necessary to threaten the safety and soundness of an
the Federal Deposit Insurance institution.3 In contrast, risks like credit
Corporation (FDIC) (collectively, the carry out the provisions of the Federal
Deposit Insurance Act, and the OCC is risk and liquidity risk are more concrete
agencies) published in the Federal and measurable and allow supervisors
authorized to prescribe rules and
Register a notice of proposed to more objectively assess a banking
regulations to carry out the
rulemaking 1 to remove the use of institution’s financial condition.
responsibilities of the office.
reputation risk from their supervisory Based on these authorities, the Assessments of these risks reflect
programs. Among other things, the subjectivity of reputation risk, the perceptions of a bank’s financial
proposed rule would also have inefficacy of reputation risk at condition consistent with objective
prohibited the agencies from requiring, identifying risks to safety and principles. Conversely, an independent
instructing, or encouraging an soundness or other statutory mandates, consideration of reputation risk by
institution to close an account, to refrain and the potential for regulatory supervisors has not resulted in
from providing an account, product, or overreach and abuse, the agencies have consistent or predictable assessments of
service, or to modify or terminate any removed reputation risk from their material financial risk. Instead, by
product or service on the basis of a supervisory frameworks and are focusing on reputation risk, supervisors
person or entity’s political, social, codifying this change in relevant attempt to understand and anticipate
cultural, or religious views or beliefs, regulations. public opinion regarding issues and
constitutionally protected speech, or events and then to attempt to directly
solely on the basis of politically II. Background connect this public opinion regarding
disfavored but lawful business activities The agencies believe that banking issues and events to an institution’s
perceived to present reputation risk. regulators’ use of the concept of condition in ways that have proven
The proposed rule further would have reputation risk as a basis for supervisory nearly impossible to assess or quantify
forbidden the agencies from taking any criticisms increases subjectivity in with accuracy. The agencies’ attempts to
supervisory action or other adverse banking supervision without adding identify reputation risks and their
action against an institution, a group of material value from a safety and potential effects on institutions have not
institutions, or the institution-affiliated soundness perspective. The agencies resulted in increased safety for
parties of any institution that is believe that most activities that could supervised institutions as supervisors
designed to punish or discourage an negatively impact an institution’s have not been able to accurately predict
individual or group from engaging in reputation do so through traditional risk
any lawful political, social, cultural, or channels (e.g., credit risk, market risk, 3 In carrying out its responsibility, the OCC has
religious activities, constitutionally and operational risk, among others) on refined its examination program based on more
protected speech, or, for political which supervisors already focus and than 160 years of experience supervising financial
reasons, lawful business activities that already have sufficient authority to institutions and monitoring developments in the
financial industry. In the late 1980s and the 1990s,
the agencies or its personnel disagree address. At the same time, supervising the OCC and other financial regulators shifted
with or disfavor. Following review of for reputation risk as a standalone risk toward supervision frameworks that were organized
the comments received on the proposal, adds substantial subjectivity to bank by particular risks. In 1995, the OCC launched an
the agencies are finalizing the proposed supervision and can be abused. It also examination program it called ‘‘supervision by risk’’
that led to the current risk-based supervision
rule, with minor modifications. The diverts bank and agency resources from approach to examinations. In the supervision by
agencies have updated the final rule’s more salient risks without adding risk program, the OCC focused on nine categories
definition of ‘‘reputation risk’’ to material value from a safety and of risk: credit risk, interest rate risk, liquidity risk,
include an express reference to the soundness perspective or ensuring price risk, foreign exchange risk, transaction risk,
compliance risk, strategic risk, and reputation risk.
operational condition of the institution. greater compliance with the law. To The program later morphed into the OCC’s current
The agencies have also modified the improve the efficiency and effectiveness risk-based framework, which focuses on eight risk
prohibition on taking supervisory action of their supervisory programs, the categories, with transaction risk renamed as
or other adverse action designed to agencies have removed reputation risk operational risk and foreign exchange risk
eliminated as a stand-alone risk. This risk-based
punish or discourage lawful business from their supervisory frameworks and supervision program focuses on evaluating risk,
activities that the ‘‘supervisor’’ disagrees are proposing to codify this change in identifying existing and emerging problems, and
with or disfavors. The agencies have relevant regulations. This change would ensuring that bank management takes corrective
updated this provision to use language also respond to concerns expressed in action to address problems before a bank’s safety
and soundness is compromised. Similarly, as
broader than ‘‘supervisor’’ to clarify that Executive Order 14331, Guaranteeing
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regulators shifted toward risk-based supervision in
bias from any individual at the agency Fair Banking for All Americans,2 that the 1990s, the FDIC added references to reputation
is not a permissible basis for agency the use of reputation risk can be a risk to manuals and guidance, and supervisors cited
action. pretext for restricting law-abiding reputation risk in formal and informal enforcement
actions in subsequent years. Generally, the FDIC’s
individuals’ and businesses’ access to supervision framework has evaluated a variety of
1 See ‘‘Prohibition on Use of Reputation Risk by risks, such as liquidity risk, interest rate risk,
Regulators,’’ 90 FR 48825 (October 30, 2025). 2 90 FR 38925 (Aug. 12, 2025). operational risk, and reputational risk.
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Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations 18281
the public’s reaction to business political, social, cultural, or religious growth of these lawful businesses and
decisions made by institutions. views or beliefs, constitutionally consequently interfering with the job
In other words, there is no clear protected speech, or politically creation and the economic activity their
evidence that supervisory interference disfavored but lawful business operations could generate.
in banks’ activities or relationships in activities. Different stakeholders may Moreover, even if reputation risk
the interest of protecting the banks’ have different perspectives on how such could be quantified, the agencies lack
reputations has protected banks from activities or relationships impact an evidence that reputation risk, in the
losses or improved banks’ performance. institution’s reputation, if at all, which absence of identified financial or
In addition to not enhancing safety creates unpredictability and operational risks, is a factor that can
and soundness, focusing on reputation inconsistency for regulated entities. hurt an institution’s safety and
risk can distract institutions and the Additionally, the subjective nature of soundness. Although there are examples
agencies from devoting resources to supervisory decisions about reputation of risks such as credit risk and liquidity
managing core financial risks—such as risk introduces the potential for political risk being the primary driver of an
credit risk, liquidity risk, and interest or other biases to enter into the institution’s unsafe or unsound
rate risk—that are quantifiable and have supervisory process. Thus, supervisory condition, the agencies have not seen
been shown to present significant judgments about reputation risk can evidence that reputation risk can be the
threats to institutions. Monitoring create subjective regulatory interference primary driver of an institution being in
requires dedicated resources. For in day-to-day business decisions of unsafe or unsound condition. When
example, in order to confront such risks, banks that should be based on neutral reputational issues are identified as a
institutions frequently purchase market factors. This practice can also cause of harm that has impacted a
expensive risk-monitoring models that result in distortions to industries and supervised institution’s financial
must be maintained, implement detailed the U.S. economy, as the agencies use condition, there are typically other more
loan review programs, hire expensive reputation risk to choose winners and significant factors, such as those relating
outside advisers, and provide time- losers among market participants and to the institution’s capital, asset quality,
intensive training for staff. Parallel to industries. Given the difficulty of liquidity, earnings, or interest rate
these actions by institutions, the measuring reputation risk in an accurate sensitivity, that are the primary drivers
agencies have limited resources and a and precise way, it is inappropriate for of the institution’s weakened financial
responsibility to use these resources in the agencies’ supervisors to examine condition. The OCC’s analysis shows
an efficient and productive manner in supervised institutions against this risk. that the agency will not lose information
furtherance of their statutory More importantly, when a supervised useful to anticipate regulated
responsibilities. In the judgment of the institution alters its behavior to comply institutions’ failure by ceasing to
agencies, examining for reputation risk with supervisory expectations relating produce reputation risk ratings in the
diverts resources that could be better to reputation risk management, such as Risk Assessment System (RAS) ratings
spent on other risks that have been by closing an account or choosing not to system, as the RAS reputation risk
shown to present significant, tangible enter into or continue a business ratings do not forecast failure after
threats to institutions and that are more relationship with a customer or industry accounting for the CAMELS composite
easily quantified and addressed through that it would otherwise maintain, it is rating and components. Instead, only
regulatory intervention. forgoing an opportunity to maintain or RAS ratings that assess fundamental
Moreover, the agencies’ use of build a profitable business relationship financial risks predict failure risk once
reputation risk in reaching supervisory that may otherwise be consistent with
CAMELS ratings are accounted for.
conclusions introduces subjectivity and sound risk management practices.
In addition, there is no evidence that
unpredictability into the agencies’ Accordingly, the agencies’ past practice
ceasing to impose Matters Requiring
judgments. Agency supervision more of encouraging supervised institutions
Attention (MRAs) that focus on
effectively fosters safe and sound to alter their behavior due to reputation
reputation risk will harm the agencies’
banking when supervised institutions risk may have adversely impacted
ability to anticipate and resolve failure
have a reasonable expectation of how institutions’ earnings, capital positions,
risk. The agencies’ analysis shows that
the agencies would evaluate an activity. and safety and soundness. In this way,
MRAs that either mention reputation
The agencies have not been able to the agencies’ prior focus on reputation
risk in the MRA description or include
clearly explain how banks should risk may have caused supervised
institutions to be less safe and sound reputation risk as either a primary or
measure the reputation risk from secondary risk have no ability to predict
different activities, business partners, or than had they been permitted to engage
in lawful business activities without bank failures.
clients, nor have the agencies been able The OCC’s supervision is required by
to clearly articulate the criteria for these limitations resulting from
supervisory expectations surrounding law to focus on the safety and
which activities, business partners, or soundness of its institutions and
clients are deemed to present reputation reputation risk.
In addition, examining for reputation compliance with laws and regulations
risk.4 Without clear standards, the as well as, as applicable, fair access to
agencies’ supervision for reputation risk risk can result in agency personnel or
leadership implicitly or explicitly financial services and fair treatment of
has been inconsistent and has at times customers.5 The FDIC is responsible for
reflected individual perspectives of encouraging institutions to restrict
access to banking services on the basis the supervision and examination of
agency staff rather than data-driven State nonmember banks, including for
conclusions. This can result in agency of agency personnel’s personal views of
a group’s or individual’s political, safety and soundness principles.6 In
staff implicitly or explicitly encouraging furtherance of these objectives, the
social, cultural, or religious views or
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institutions to restrict access to banking agencies’ supervision should focus on
services on the basis of staff’s personal beliefs, constitutionally protected
views of a group’s or individual’s speech, or politically disfavored but
5 12 U.S.C. 1.
lawful business activities. Denying 6 See 12 U.S.C. 1811 et seq. The FDIC also insures
4 Supervised institutions have similarly been lawful businesses access to financial the deposits of insured depository institutions and
unable to explain this in their own risk services can further have negative manages receiverships of failed depository
management programs. effects on the economy by hindering the institutions.
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18282 Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations
concrete risks and objective criteria The prohibitions of the proposed rule A. Comments Regarding the Need for
directly related to applicable statutory would have applied to actions taken on and Adoption of the Rule
requirements. In the agencies’ the basis of reputation risk; political, Although the agencies received
experience, using reputation risk in its social, cultural, or religious views and comments both supporting and
supervisory process does not further beliefs; constitutionally protected opposing the proposed rule, the
this mission. speech; or solely based on bias against majority of comment letters expressed
III. Overview of the Notices of Proposed politically disfavored but lawful support. Many commenters urged the
Rulemaking and General Summary of business activities perceived to present agencies to adopt the proposed rule
Comments reputation risk. The proposed rule because they perceived reputation risk
would not have prohibited criticism, to be ill-suited as a supervisory tool.
The proposed rule sought to codify supervisory feedback, or other actions to
the removal of reputation risk from the These commenters expressed concern
address traditional risk channels related that reputation risk is subjective and
OCC and FDIC’s supervisory programs. to safety and soundness and compliance
The proposed rule would have hard to measure in a predictable or
with applicable laws, including credit quantitative fashion. These observations
prohibited the agencies from criticizing, risk, market risk, and operational risk
formally or informally, or taking adverse mirrored the agencies’ experience with
(including cybersecurity, information the shortcomings of reputation risk as a
action against an institution on the basis security, and illicit finance), provided
of reputation risk. In addition, under the supervisory tool, as discussed above in
that such criticism, supervisory the ‘‘Background’’ section. The
proposal, the agencies would be feedback or other action addressing
prohibited from requiring, instructing, commenters explained that this
these other risks was not a pretext subjectivity interfered with both banks
or encouraging an institution or its designed to covertly continue
employees to refrain from contracting and other regulators for FDIC-insured
supervision for reputation risk. banks, such as State banking agencies,
with or to terminate or modify a
contract with a third party, including an Under the proposed rule, the OCC being able to anticipate Federal
institution-affiliated party, on the basis planned to make seven conforming regulators’ perspectives and concerns.
of reputation risk. The proposed rule amendments to the OCC’s regulations to These commenters also noted that
also stated that the agencies could not eliminate references to reputation risk. regulators’ focus on reputation risk, and
require, instruct, or encourage an These conforming amendments would the consequent need for financial
institution or its employees to refrain be made in (1) the list of risks a national institutions to focus on anticipating
from doing business with or to bank shall consider, as appropriate, as regulators’ concerns regarding
terminate or modify a business set out in 12 CFR part 1 of the OCC reputation risk, distract from more
relationship with a third party, regulations; and (2) the safety and material risks or better use of resources.
including an institution-affiliated party, soundness standards set forth in 12 CFR The agencies agree with these
on the basis of reputation risk. The part 30 of the OCC regulations, observations by commenters on the
proposed rule would have also including the OCC guidelines. The OCC harms of including reputation risk in
prevented the agencies from requiring, regulations at 12 CFR part 30 would the supervisory program.
instructing, or encouraging an include six conforming amendments.7 In contrast, other commenters
institution to enter into a contract or Under the proposed rule, the FDIC opposed the proposed rule and stated
business relationship with a third party planned to make one conforming that examination for reputation risk is
on the basis of reputation risk. The amendment to the FDIC’s regulations necessary to support bank safety and
proposed rule would have further relating to reputation risk. This soundness. In contrast to the
prohibited the agencies from requiring, amendment would be made in the safety commenters who stated that reputation
instructing, or encouraging an and soundness standards set forth in 12 risk cannot be measured quantitatively
institution or an employee of an CFR part 364 of the FDIC’s regulations.8 or objectively, one commenter stated
institution to terminate a contract with, Under the proposed rule, the FDIC that it could be measured accurately.
discontinue doing business with, or would eliminate the reference to However, this commenter did not
modify the terms under which it will do reputation risk in the regulation. recommend an actionable method that
business with a person or entity on the The agencies received comments on the agencies could adopt for such a
basis of the person’s or entity’s political, many areas of the proposed rule. The measurement, and the regulators are not
social, cultural, or religious views or commenters represented government aware of an objective and reliable
beliefs, constitutionally protected entities, congresspeople, industry trade method for measuring reputation risk.
speech, or solely on the basis of the groups, nonprofits, financial Some of these commenters stated that
third party’s involvement in politically institutions, other types of businesses, damage to a bank’s reputation can cause
disfavored but lawful business activities and individuals. The agencies received substantial financial harm to a bank. As
perceived to present reputation risk. a mix of comments both supporting and support for this assertion, some
The proposed rule was solely focused opposing the proposed rule. Many commenters cited the spring 2023 bank
on the functions and activities of the commenters made suggestions for failures, which they claimed happened
OCC and the FDIC. The proposed rule alternatives to the rule or for ways to due to reputational harms to the
did not include prohibitions, strengthen or alter the rule. financial institutions involved.
restrictions, or requirements on the self- However, those failures were caused by,
directed activities of supervised IV. Overview of Final Rule among other contributing factors, a lack
institutions or institution-affiliated The agencies have decided to adopt of public confidence in the financial
parties. condition of the institutions; the
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the proposed rule with minor
The proposed rule provided modifications. agencies have not identified non-
definitions of several terms used in the financial reputation risk as among them.
rule, including ‘‘adverse action,’’ ‘‘doing 7 See 91 FR 16156 (Apr. 1, 2026) (rescission of
The final rule is adopting from the
business with,’’ ‘‘institution,’’ appendix E of 12 CFR part 30 effective May 1, proposed rule a definition of reputation
‘‘institution-affiliated party,’’ and 2026). risk that specifically excludes issues
‘‘reputation risk.’’ 8 12 CFR part 364. that could negatively impact public
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Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations 18283
perception for reasons ‘‘clearly and ultimately national security. However, practices will continue to be forbidden,
directly related to the financial as another commenter noted, the and the agencies will continue to expect
condition of the institution.’’ Thus, the agencies’ efforts to take sides in ongoing their regulated institutions to comply
concerns that caused the public to cease public debates can harm the stability of with all applicable laws addressing
doing business with the institutions the banking system because whichever these issues. Moreover, the proposed
affected by the spring 2023 bank failures side the regulators decide against and rule does not alter the legal
were not the types of concerns that denounce as causing reputational harm requirements and supervisory
would fall under the definition of to financial institutions will lose faith expectations around the detection and
reputation risk in the final rule and for and trust in the regulators, thus harming prevention of fraud. The removal of
which the agencies would be prevented the credibility that U.S. financial reputation risk from the agencies’
from supervising. Indeed, the Spring regulatory structure relies upon. For the supervisory programs will not impact
2023 failures were examples of the types reasons explained by this commenter, the agencies’ continued examination for
of material financial risks on which the agencies believe that the harm to compliance with these types of laws,
regulators and institutions need to focus their public legitimacy that will come but rather will allow the agencies to
and from which they can be distracted from entering into contentious public better allocate its resources during
by more nebulous and not-financially- debates outside of their statutory examinations.
related reputation risk concerns. responsibilities is greater than the
Some commenters argued that B. Comments Regarding Harms From
potential for not supervising for Regulators Pressuring Banks To Stop
removing supervision for reputation risk reputation risk to cause harm, risk
downplays the importance of customer Serving Certain Industries Due to
which the agencies believe to be highly Perceived Reputation Risks
loyalty and trust. However, the agencies unlikely for the reasons described
have not observed that supervision for above. Some commenters argued that
reputation risk helps support customer economic harm to both individuals and
Another commenter stated that the to the broader economy resulted from
loyalty to financial institutions, an area
proposed rule strips away an important debanking customers due to perceived
that banks compete on. Indeed, as
means of recognizing discrimination reputation risk. Some of these
another commenter explained, policing
and extremism in financial institutions. comments were from individuals or
for reputation risk concerns can actually
This commenter argued that reputation trade organizations whose members had
harm an institution’s customer loyalty.
risk has been a regulatory tool that been debanked despite the benefits that
This commenter explained how
financial institutions could harm their allowed early intervention in they believed their industry or business
reputations by closing accounts on the developing patterns of discriminatory or offered to the economy. These
basis of religious or political bias and predatory banking practices by banks. commenters argued that their members
thus how attempts to mitigate Another commenter, similarly, was were engaged in lawful business
reputation risk can actually harm concerned that removing examination operations, complied with extensive
financial institutions. The commenter for reputation risk would cause regulations as applicable, and employed
provided an example of negative financial institutions to lose their ability many Americans. Other commenters
publicity that a bank purportedly to detect emerging threats such as noted that financial institutions benefit
experienced after closing the certain fraud schemes. Other from greater engagement with all
commenter’s account allegedly for commenters were likewise concerned industries in the U.S. economy and that
religious reasons. that removing supervision for reputation such financial institutions are
In the agencies’ experience, risk would remove deterrence from financially harmed by being prevented
supervising for reputation risk requires banks engaging in predatory practices from doing business with certain sectors
the agencies to determine which sides of such as fraudulent account scandals or due to reputational concerns. These
potentially contentious political, social, from providing services for people who observations about the harms from
and religious issues will be favored by have committed crimes. Similarly, regulators pressuring banks to stop
the customers of the regulated another commenter argued that the serving certain industries under the
institutions. Attempting to ensure agencies should consider that removing guise of protecting against reputation
‘‘customer loyalty’’ for regulated reputation risk could lead to increased risk are generally consistent with the
institutions by preventing regulated incidence of illegal and risky activities agencies’ understanding of supervision
institutions from providing services for that might be flagged by reputation risk for reputation risk. The agencies agree
businesses, individuals, or activities monitoring. In the same vein, one with these observations about these
that may offend customers requires the commenter opined that removing harms and that the agencies should not
agencies to accurately predict public examination for reputation risk would be requiring, instructing, or encouraging
sentiment regarding controversial increase unethical behavior by banks. an institution to close an account, to
issues. The agencies have not shown the This same commenter further stated that refrain from providing an account,
ability to accurately do this in a the agencies must consider that product, or service, or to modify or
consistent and reliable manner, and removing reputation risk could lead to terminate any product or service on the
efforts to predict public opinion have worsening service for customers. basis of a perceived reputation risk.
distracted both regulators and the However, the final rule does not repeal One commenter expressed concern
regulated from focusing on risks they or alter any of the existing laws or about the ‘‘economic distortion’’ created
can understand and predict. regulations prohibiting discriminatory by the use of reputation risk and by the
Commenters were divided on whether or predatory banking practices, and regulators picking economic winners
supervision for reputation risk harms there is no evidence suggesting it could and losers. Another commenter
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the integrity of the banking system and lead to worsening customer service. similarly noted that debanking due to
banking regulation. One commenter Moreover, issues stemming from a lack reputation risk can also open the door
stated that removing supervision for of customer service fall outside of what to what the commenter described as an
reputation risk would harm the integrity is being considered to be a reputation ‘‘economic heckler’s veto’’ by any
of the banking system, the political risk, as defined in the final regulation. economically powerful entity, such as a
institutions, U.S. elections, and Illegal discrimination and predatory customer or investor. This commenter
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18284 Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations
argued that allowing an economically that the agencies’ prior use of reputation F. Comments Alleging That the
powerful entity to pressure an risk violated the APA requirement that Agencies Failed To Consider Certain
institution to not provide services to agency actions not be arbitrary or Aspects of the Rule
certain businesses by claiming that such capricious, that substantive rules be One commenter argued that the
would create reputation risk could, in promulgated through notice-and- agencies had not presented enough
practice, give outsized weight to those comment procedures, and that agencies evidence that ceasing to examine for
who already have economic or financial act within their statutory authority. The reputation risk would lead to better
power. agencies believe that, regardless of supervisory outcomes. To the contrary,
In support of banks’ discretion, one consistency with APA requirements, as the agencies explained above in the
commenter stated that businesses such removing reputation risk will be of ‘‘Background’’ section, while there are
as those involving digital assets or fossil benefit by providing less opportunity for examples of risks like credit risk and
fuels are not members of a protected subjectivity in the future. Thus, this liquidity risk being the primary driver of
class and therefore are not entitled to concern is another reason that the an institution’s unsafe or unsound
guaranteed access to the banking agencies have decided to adopt the final condition, the agencies have not seen
system. Similarly, another commenter rule. evidence that reputation risk can be the
stated that the government should not primary driver of an institution being in
be favoring certain sectors by preventing D. Suggestions for Alternatives To
Removing Reputation Risk From the unsafe or unsound condition. Even in
financial institutions from debanking cases when reputational issues are
them. However, the rule both as Supervisory Program
identified as a cause of harm that has
proposed and as adopted here only Several commenters suggested that impacted a supervised institution’s
constrains agency action and does not the agencies reform the use of financial condition, there are typically
compel or restrict any actions by reputation risk in its supervisory other more significant factors, such as
financial institutions. program rather than remove the concept those relating to the institution’s capital,
As noted, the agencies agree with the entirely. These commenters argued that asset quality, liquidity, earnings, or
concerns about economic distortions the agencies could establish clearer interest rate sensitivity, that are the
caused by regulators favoring or standards and metrics for measuring primary drivers of the institution’s
disfavoring certain legal businesses over reputation risk to make it more weakened financial condition.
other legal businesses. It is not the role objective. However, these commenters Commenters also alleged that the rule
of financial regulators to pick winners did not propose methods for failed to consider the loss to the Deposit
and losers among lawful businesses or accomplishing this that would be Insurance Fund from not examining for
to attempt to suppress lawful actionable and effective, and, in the reputation risk. As the agencies have
businesses. agencies’ experience, such standards explained, given the lack of evidence
C. Legal and Constitutional-Related and metrics do not exist in a form that linking perceived reputation risks to
Concerns Regarding the Agencies’ Use is accurate and consistent. Moreover, material financial harm at regulated
of Reputation Risk even if reputation risk could be entities, the agencies do not expect an
monitored through clearer standards or increase in bank failures due to the
Some commenters contended that the
metrics, as explained above, agency removal of reputation risk from the
use of reputation risk as a supervisory
experience has not shown a clear and supervisory program. Another
tool violates multiple parts of the U.S.
consistent connection between commenter argued that the agencies
Constitution. For example, some
reputation risk and actual financial should consider that removing
commenters expressed the concern that
harm to regulated institutions. reputation risk could lead to increased
reputation risk has been used to chill
Therefore, even if clearer standards or incidence of illegal and risky activities
free speech. One commenter also argued
metrics could be established, the that might be flagged by reputation risk
that the use of reputation risk is in
resources necessary to formulate such monitoring. Removing reputation risk
violation of the Fifth Amendment of the
clearer metrics would still not be well from the supervisory program will make
Constitution because it is
spent because it is not clear that the
unconstitutionally vague. Other
purported risk being measured actually Legitimate Businesses?’’ (Comm. Print 2014),
commenters argued that the use of https://oversight.house.gov/wp-content/uploads/
impacts financial institutions’ safety
reputation risk infringes on Americans’ 2014/05/Staff-Report-Operation-Choke-Point1.pdf;
and soundness. Staff of H. Comm. on Fin. Servs., 119th Cong.,
Second Amendment right to bear arms
‘‘Operation Choke Point 2.0: Biden’s Debanking of
by causing debanking in the firearms E. Comments Regarding Evidence of Digital Assets’’ (Comm. Print 2025), https://
industry. Debanking financialservices.house.gov/uploadfiles/2025-11-30-
The agencies believe that, regardless Several commenters argued that the -_fsc_debanking_report_final_1.pdf; Staff of
of the constitutionality of using Minority of S. Comm. on Banking, Hous., & Urb.
agencies had not presented sufficient Affs., 119th Cong., ‘‘Supplemental Memorandum:
reputation risk, removing it will reduce evidence that debanking occurred that Analysis of CFPB Consumer Complaints Related to
the subjectivity of the supervisory was caused by regulators’ concerns Debanking,’’ (Comm. Print 2025) (analysis to
program and thus improve the oversight regarding reputation risk. In contrast, supplement February 5, 2025, committee hearing on
of financial institutions. Thus, agencies ‘‘Investigating the Real Impacts of Debanking in
other commenters alleged that they or America’’), https://www.banking.senate.gov/imo/
do not need to determine whether there their members had been debanked due media/doc/debanking_complaints_analysis.pdf;
would be further issues regarding to political biases that were labeled as Exec. Order No. 14331, 90 FR 38925 (Aug. 7, 2025)
constitutionality. Therefore, the reputation risk. The agencies believe
(‘‘Bank regulators have used supervisory scrutiny
agencies see removing reputation risk and other influence over regulated banks to direct
that the potential for reputation risk to or otherwise encourage politicized or unlawful
from the supervisory program as a
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be misused in this manner supports debanking activities. ‘Operation Chokepoint,’ for
prudent measure to address the removal from the agencies’ supervisory example, was a well-documented and systemic
potential for such transgressions. program.9
means by which Federal regulators pushed banks to
Commenters also alleged that the use minimize their involvement with individuals and
companies engaged in lawful activities and
of reputation risk violated the 9 See, e.g., Staff of H. Comm. on Oversight & Gov’t industries disfavored by regulators based on factors
Administrative Procedure Act (APA). Reform, 113th Cong., ‘‘The Department of Justice’s other than individualized, objective, risk-based
Specifically, these commenters argued ‘Operation Choke Point’: Illegally Choking Off standards.’’).
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Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations 18285
available more resources for supervision suggestion raised by commenters was conditions, competitive pressures, or
of illegal or abusive practices. This same that the agencies should encourage customer relationship management,
commenter further stated that the institutions to identify customers whose provided such discussions do not cross
agencies must consider that removing accounts were closed or services denied the line into criticism or adverse action
reputation risk could lead to worsening solely on reputation grounds and to based on reputation risk or prohibited
service for customers. However, issues offer those customers a path to considerations. The agencies confirm
stemming from a lack of customer reinstatement, subject to standard, risk- that it is not the intention of the rule to
service fall outside of what is based underwriting. However, this hinder this type of communication.
considered to be reputation risk as rulemaking is solely focused on the
H. Discussion of Specific Sections of the
defined in the final regulation. A actions of the agencies, not on the
Final Rule and Comments Thereon
commenter further alleged that there actions of institutions regulated by the
would be capital flight to lenders in agencies, so these comments and all 1. Definitions
other jurisdictions with adequate other suggestions for expanding the rule i. Definition of Adverse Action
supervision of reputation risk. The to monitor, control, or prohibit private
commenter presented no evidence to entity action are all outside the scope of ‘‘Adverse action,’’ as defined by the
support his assertion that this would this rulemaking. Other comments that rule, includes the provision of negative
occur. Since the agencies ceased provided suggestions for improving or feedback, including feedback in a report
examining for reputation risk in early clarifying agency supervisory practices of examination, a memorandum of
2025, they have seen no such flight of or altering methods for supervisory understanding, verbal feedback, or an
capital. communication beyond the removal of enforcement action. Furthermore,
reputation risk are likewise outside the ‘‘action’’ encompasses any action of any
G. Suggestions for Expanding the Rule agency employee, including any
scope of this rulemaking.
Some commenters suggested One commenter requested communication characterized as
expanding the rule in various ways to clarification that institutions would still informal, preliminary, or not approved
control the behavior of regulated be expected to guard against issues that by agency officials or senior staff. A
entities. The comments included could affect their reputations, such as downgrade (or contribution to a
suggestions to prohibit banks from fraud. Supervised institutions have legal downgrade) of any supervisory rating,
choosing, without regulator pressure, to and supervisory requirements to be including a rating assigned under the
debank customers based on reputational vigilant against fraud, and these Uniform Financial Institutions Rating
concerns or disagreement with requirements are not affected by this System or comparable rating system,
protected political views or speech. rule.10 The expectation that banks also constitutes an ‘‘adverse action.’’ In
However, other commenters opposed continue to follow all legal requirements addition, a downgrade (or contribution
this idea, and some commenters for their operations and their treatment to a downgrade) of a rating under the
requested clarifying language be added of customers is not altered. Moreover, Uniform Interagency Consumer
that banks still retain discretion concerns regarding fraud directly Compliance Rating System or the
regarding whom they do business with. impact the operational and financial Uniform Rating System for Information
These suggestions are all outside the condition of the institution and can Technology, or any other rating system,
scope of this rulemaking, which is directly cause consumer harm. Thus, also constitutes an ‘‘adverse action.’’
solely focused on the actions of the the rule excludes public concerns Further, a denial of a filing or licensing
agencies and not on controlling or regarding these issues from the application or an imposition of a capital
addressing the actions of supervised definition of reputation risk. requirement above the minimum ratios
entities or other private parties. Another suggestion raised by constitutes an ‘‘adverse action’’ under
In a similar vein, one commenter commenters was that the agencies the rule, as does any burdensome
recommended that the rule include a should establish or publicize complaint requirements placed on an approval, the
requirement that national banks and channels enabling individuals and introduction of additional approval
Federal savings associations must report businesses to report suspected requirements, or any other heightened
to the agencies information regarding all reputation risk-based denials or closures requirements on an activity or change.
deposit account terminations and that at supervised institutions. The OCC The agencies are also including in the
the rule should require the agencies to maintains a website, https:// rule a general ‘‘catch-all’’ for any other
make this information publicly available helpwithmybank.gov/, through which actions that could negatively impact an
annually in a report covering deposit members of the public can file a report institution outside of traditional
account termination data for each if they believe they have been unfairly supervisory channels. This catch-all is
reporting bank and savings association debanked or discriminated against by meant to include actions such as
along with aggregate statistics on their bank due to their political or supervisory decisions on applications
deposit account terminations. Similarly, religious beliefs or lawful business for waivers outside of the normal
other commenters suggested that all activities. The FDIC maintains a similar licensing or filing channels,
debanked customers who had an website at https://ask.fdic.gov/ applications to engage in certain
account closed should be able to access fdicinformationandsupportcenter/s/ business activities for which
information from their financial ?language=en_US, where members of supervisory permission is required, or
institution to understand the reason for the public can file complaints about other regulatory decisions affecting
the closure and to have a means for financial institutions. institutions. Intent is the defining
redress if there was an error. Another One commenter requested that the characteristic for whether an agency
commenter recommended that banks agencies clarify that the proposed rule action would fall into this catch-all
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should be required to provide written would not prevent examiners from provision. As illustrations of agency
notice when terminating or materially engaging in constructive conversations actions that are subject to this
modifying customer relationships, about business strategy, market prohibition, the prohibition prevents the
including a statement of the reasons for agencies from, for example:
such actions, unless otherwise 10 See 12 CFR 21.11, 12 CFR 353.1, and 31 CFR disapproving a proposed member of a
prohibited by law enforcement. Another 1020.320. board of directors on the basis of an
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18286 Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations
unsubstantiated pretense where the true or businesses’ ability to operate can be contradictory. However, as explained by
reason is reputation risk, denying a evidence of impermissible agency intent the agencies above in the ‘‘Background’’
waiver of bank director citizenship and as financial and compliance risks are section, the agencies’ supervisory
residency requirements for the purpose not likely to be so uniformly high as to experience has found that reputation
of inducing an institution to address require such a result. risk, as defined in the rule, is not
perceived reputation risk somewhere in Thus, the agencies are adopting the financially material to institutions.
the institution’s operations, or definition of ‘‘adverse action’’ as The agencies received comments that
disapproving a change of control notice proposed. were divided on whether the definition
because an institution lacks internal of ‘‘reputation risk’’ should include the
ii. Definition of Doing Business With term ‘‘operational’’ in the phrase ‘‘for
reputation risk controls. Agency actions
subject to this prohibition also include The term ‘‘doing business with’’ in reasons not clearly and directly related
negative feedback that is verbal, a the proposed rule is intended to be to the financial condition of the
condition attached to an approval, the construed broadly and to include institution.’’ One commenter believed
introduction of new approval business relationships both with clients that the term ‘‘operational’’ could be
requirements, and any other heightened of the institution and with third-party used to evade the intention of the rule
requirements that are intended to force service providers. It is also intended to to allow some consideration of
the bank to address perceived include the relationship of a bank with reputation risk. However, another
reputation risk. organizations or individuals that the commenter noted that including this
bank is providing with charitable term would be consistent with other
The agencies received comments both
services, including as part of a provisions of the rule that explicitly
supporting and opposing the proposed
community benefits agreement or as preserve the agencies’ authority to
definition of ‘‘adverse action.’’ Although
part of a Community Reinvestment Act supervise for operational risk.
some commenters supported the The agencies have decided to add
proposed definition, one commenter plan. This term is intended to include
both existing business relationships and ‘‘operational’’ into the final rule such
stated that agencies should be less that the definition of ‘‘reputation risk’’
focused on the ‘‘intent’’ of the action in prospective business relations. No
comments were received on this will be ‘‘any risk, regardless of how the
the catch-all provision because ‘‘intent’’ risk is labeled by the institution or
might be hard to prove. However, the definition.
regulators, that an action or activity, or
agencies believe that including ‘‘intent’’ iii. Definition of Institution-Affiliated combination of actions or activities, or
is helpful to avoid capturing agency Party lack of actions or activities, of an
actions that might unintentionally The term ‘‘institution-affiliated party’’ institution could negatively impact
negatively impact a certain industry but has the same meaning as in section 3 of public perception of the institution for
is not intended to have that affect. For the Federal Deposit Insurance Act.11 No reasons not clearly and directly related
instance, an institution may be to the financial or operational condition
comments were received on this
criticized for having a large of the institution.’’ The agencies agree
definition.
concentration of loans in a specific that operational risk is a significant
business sector without proper risk iv. Definition of Reputation Risk concern for institutions. Public
management of the concentration risk Several commenters recommended perception that an institution could be
presented. Such criticism might that the proposed definition of susceptible to a breakdown in the
unintentionally dissuade the institution reputation risk be altered to remove the provision of services due to operational
from making further loans to that phrase ‘‘for reasons not clearly and issues such as a cyberattack or a natural
business sector, but such is not the directly related to the financial disaster could have a direct impact on
intent of the criticism, and such condition of the institution.’’ However, customer’s willingness to do business
criticism can be important to the safety the agencies believe this phrase is with an institution and thus on the
and soundness of the institution. As necessary to maintain the ability of the institution’s financial solvency.
evidence of ‘‘intent’’ the agencies will agencies to address public concerns that
look to both the effect of the action as 2. Prohibitions on the Use of Reputation
directly relate to an institution’s Risk in the Supervisory Process
well as the justification for the action. financial condition and solvency
For instance, unsubstantiated or poorly because those concerns can lead to runs. Section (a) of the rule prohibits the
substantiated claims or justification for Unlike public concerns about an agencies from criticizing, formally or
actions are evidence of possible ulterior institution doing business with informally, or taking adverse action
motivations for actions that have a politically controversial people or against an institution on the basis of
negative effect on a religious group or entities, concerns about an institution’s reputation risk. Section (b) prohibits the
lawful business. Inconsistent financial condition have been shown agencies from requiring, instructing, or
application of standards or adverse repeatedly to lead to a direct negative encouraging an institution or its
actions between similarly situated impact on the institution that can cause employees to refrain from contracting
parties, especially without an failure. with or to terminate or modify a
explanation for the discrepancy, can One commenter stated that reputation contract with a third party, including an
also be evidence of an intent to risk is always directly financially institution-affiliated party, on the basis
impermissibly punish or discourage an material and thus the phrase in the of reputation risk. The agencies also
individual or group from engaging in definition of reputation risk that it is cannot require, instruct, or encourage an
lawful political, social, cultural, or ‘‘not intended to capture risks posed by institution or its employees to refrain
religious activities, constitutionally public perceptions of the institution’s from doing business with or to
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protected speech, or lawful business current or future financial condition terminate or modify a business
activity. Moreover, an agency action that because such perceptions relate to risks relationship with a third party,
completely or effectively prevents the other than reputation risk’’ is self- including an institution-affiliated party,
affected group, individual, or business on the basis of reputation risk. Section
from accessing financial services or 11 Public Law 81–797, 64 Stat. 873 (codified at 12 (c) of the rule further prevents the
severely hinders the group, individual, U.S.C. 1813(u)). agencies from requiring, instructing, or
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Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations 18287
encouraging an institution or an the rule prohibits supervisors from with or disfavors.’’ Some commenters
employee of an institution to enter into using these provisions as a pretext for requested that this prohibition be
a contract or business relationship with reputation risk when making expanded to cover all agency personnel,
a third party on the basis of reputation determinations regarding such not just supervisors. Similarly, another
risk or to terminate a contract with, applications. commenter suggested that the
discontinue doing business with, or The agencies received multiple prohibition should be extended to
modify the terms under which it will do comments on these sections. First, on prohibit any attempt to discourage
business with a person or entity on the section (c), commenters were divided on lawful political or religious activity
basis of the person’s or entity’s political, whether the ‘‘solely’’ should be removed regardless of what the supervisor thinks
social, cultural, or religious views or from the prohibition that the agencies about the activity.
beliefs, constitutionally protected will not require, instruct, or encourage The agencies did not intend this
speech, or solely on the basis of the an institution or its employees to provision to be read so narrowly as to
third party’s involvement in politically terminate a contract with, discontinue only cover the views of supervisory staff
disfavored but lawful business activities doing business with, sign a contract as compared to the views of other
perceived to present reputation risk. with, initiate doing business with, members of the agencies. Thus, the
Finally, section (f) of the rule provides modify the terms under which it will do agencies are changing the wording in
that the agencies will not take any business with a person or entity, ‘‘solely the final rule to cover lawful political,
supervisory action or other adverse on the basis of the person’s or entity’s social, cultural, or religious activities,
action against an institution, a group of involvement in politically disfavored constitutionally protected speech, or, for
institutions, or the institution-affiliated but lawful business activities perceived political reasons, lawful business
parties of any institution that is to present reputation risk.’’ activities that are disfavored by the
designed to punish or discourage an Some commenters felt the word agency or any of its personnel. This
individual or group from engaging in ‘‘solely’’ should be maintained because wording is to clarify that it does not
any lawful political, social, cultural, or otherwise banks could face regulatory matter whether the bias comes from the
religious activities, constitutionally uncertainty even when legitimate risk head of the agency or from an
protected speech, or, for political factors are the primary basis for the individual examiner, the bias is not a
reasons, lawful business activities that decision. Other commenters were permissible basis for agency action.
the supervisor disagrees with or concerned that ‘‘solely’’ should not be Commenters also stated that it was
disfavors. included because it could be read to unclear whether references to views and
These prohibitions do not affect imply that reputation risk could be beliefs would extend to actions based on
requirements intended to prohibit or considered, just not as a stand-alone those views or beliefs. Some
reject transactions or accounts risk. commenters recommended extending
associated with Office of Foreign Assets The agencies included the word the prohibition to cover actions as well
Control-sanctioned persons, entities, or ‘‘solely’’ in this phrase to provide the as the views or beliefs themselves. The
jurisdictions. Such prohibitions and ability for regulators to discourage agencies intend for the prohibition to
rejections are not based specifically on activities that may implicate safety and extend to lawful activities based on
‘‘the person’s or entity’s political, social, soundness through traditional risk political, social, religious, and cultural
cultural, or religious views or beliefs, channels but also involve a legitimate views or beliefs that do not affect
constitutionally protected speech, or business activity that might be creditworthiness or other permissible
politically disfavored but lawful politically disfavored. Given that the risk factors such as market risk.
business activities perceived to present agencies still believe it is important to Although agency actions designed
reputation risk.’’ The prohibition also maintain this flexibility, the final rule is solely to discourage or punish a given
does not affect the agencies’ authority to adopting the language in this provision view or belief are impermissible, the
enforce the requirements of the as proposed and maintaining the word agencies are not prevented from
provisions of United States Code title ‘‘solely.’’ The agencies will consider considering actions that relate to
31, chapter 53, subchapter II regarding whether an agency action that appears permissible risk factors solely because
reporting on monetary transactions.12 to have some impermissible reputation those actions stem, in whole or in part,
However, due to the broad nature of risk considerations underlying it but from a political, social, cultural, or
Bank Secrecy Act (BSA) 13 and anti- proports to be based largely on religious view or belief.
money laundering (AML) supervision, permissible concerns violates the anti-
Another commenter recommended
there is a risk that BSA/AML focused evasion provisions in the rule.
that the prohibition in section (f) against
supervisory actions could indirectly Multiple commenters had concerns
adverse action should not only cover
address reputation risk. The rule regarding the language at the end of
adverse actions that are designed to
prohibits supervisors from using BSA section (f), which states that the
punish or discourage individuals from
and anti-money laundering concerns as agencies will not ‘‘take any supervisory
engaging in certain beliefs or businesses,
a pretext for reputation risk. In addition, action or other adverse action against an
but also adverse actions that actually
although the agencies may continue to institution, a group of institutions, or
have that effect regardless of the intent
consider the statutory factors required the institution-affiliated parties of any
of the action. However, the agencies are
with respect to certain applications,14 institution that is designed to punish or
concerned that adopting such language
discourage an individual or group from
would prevent the agencies’ ability to
12 15 U.S.C. 5311 et seq. engaging in any lawful political, social,
address important risks that are directly
13 Id. cultural, or religious activities,
related to the financial condition of the
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14 See, e.g., 12 U.S.C. 1816 (requiring the FDIC to
constitutionally protected speech, or, for
consider, among other things, the ‘‘general character institution if the remediation measures
political reasons, lawful business
and fitness of the management of the depository necessary for addressing such risks
institution’’ in an application for deposit activities that the supervisor disagrees
would unintentionally impact certain
insurance); 12 U.S.C. 1817(j)(2)(B) (requiring the
agencies to ‘‘conduct an investigation of the acquirer of an institution following a notice of a
businesses or individuals with certain
competence, experience, integrity, and financial proposed change in control of a depository beliefs. Thus, the agencies are not
ability of each person named’’ as a proposed institution). adopting this suggestion.
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18288 Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations
I. Other Modifications in the Rule attributing the removal of reputation adverse supervisory actions against
Regulations codified in 12 CFR part risk to OCC Bulletin 2025–4. The supervised institutions related to
41 of the OCC regulations and 12 CFR analysis does so because the statements reputation risk.
part 334 of the FDIC’s regulations refer in OCC Bulletin 2025–4 are not legally To assess institutions’ cost savings
to reputation risk concerning certain binding and therefore only the final rule from the final rule, the OCC looked to
identity theft prevention programs legally removes reputation risk from its supervisory experience regarding
required by the Fair and Accurate Credit bank supervision. expected cost savings from the removal
Transactions Act of 2003. However, by 3. Background of reputation risk from supervision.
statute, guidelines and regulations for Based on this feedback, the OCC
As previously discussed, to improve
these programs must occur jointly assessed that cost savings will depend
the efficiency and effectiveness of their
across certain Federal agencies, so no on how much regulated institutions’
conforming amendment is suggested for supervisory programs, the agencies are
costs decrease from no longer being
12 CFR parts 41 or 334. The OCC and proposing revising their supervisory
required to explicitly respond to
FDIC are considering making changes to frameworks to remove reputation risk.
reputation risk concerns from
12 CFR parts 41 and 334, respectively, The rule would prohibit the OCC from
regulators.
in a separate, joint rulemaking in the criticizing or taking adverse actions
(broadly defined) against an institution OCC supervisory experience also
future. Until that separate, joint indicated that because supervisory
rulemaking occurs, the agencies expect on the basis of reputation risk.
actions that the OCC typically took that
to exercise their discretion in enforcing 4. Parties Affected by the Proposal mentioned reputation risk, such as
12 CFR parts 41 and 334 by using The OCC currently supervises 997 MRAs, almost always involved other
agency resources to assess compliance national banks, Federal savings risk issues as well, the overall number
without regard to reputation risk. associations, trust companies and of MRAs may not decrease. The OCC’s
V. Impact Analysis Federal branches and agencies of foreign analysis found that most MRAs that
banks (collectively, ‘‘banks’’).15 Because listed reputation risk as the primary or
A. OCC Expected Effects all OCC-regulated banks and institutions secondary concern also listed other risk
1. Introduction were subject to reputation risk categories as concerns as well.16
The OCC and the FDIC are issuing a assessments, the rule would affect all Nonetheless, the OCC expected that
final rule to eliminate reputation risk 997 institutions supervised. Because the there should be some cost savings for
from their supervisory programs. The rule aims to remove the influence of the institutions as they no longer need to
rule would prohibit the agencies from agencies’ reputation risk assessments on address the reputation risk concern
using reputation risk in their risk institutions’ customer relationships, the components of an MRA.
assessments of institutions that they OCC concludes that the rule could Based on an analysis of the number of
supervise and from influencing the potentially affect all OCC regulated MRAs that mentioned reputation risk as
relationship between the regulated institutions’ current and future a primary or secondary concern over the
institutions and their customers based customers. past 10 years, the OCC finds that
on a customer’s political, social, 5. Costs and Benefits: Cost Savings to roughly 17 percent of MRAs per year
cultural, or religious views or beliefs or Regulated Institutions mention reputation risk as primary or
solely lawful business activities secondary concern (Table 1). Based on
i. Cost Savings From Decreased the frequency of past MRAs that
perceived to present a reputational risk.
Regulatory Compliance Burden mentioned reputation risk as a concern,
2. Regulatory Baselines and Conclusions The OCC expects that the rule will the OCC expects that, if MRAs would
The OCC assumes that the removal of result in cost savings to regulated have continued to mention reputation
reputation risk resulted from the final institutions from a reduced compliance risk as a concern at a similar rate in the
rule analyzed here rather than OCC burden. The rule reduces regulatory absence of the final rule, that OCC
Bulletin 2025–4. In the OCC’s burden because the OCC will no longer institutions will experience substantial
assessment, the OCC accounted for the engage in examinations that assess, in cost savings from no longer having to
full effect of the removal of reputation part, issues explicitly related to address reputation risk as part of an
risk from supervision, rather than reputation risk, nor will the OCC take MRA may be substantial.
TABLE 1—PERCENTAGE OF MRA LISTED AS REPUTATION RISK, BY PRIMARY OR SECONDARY CONCERN
Percentage of MRAs
Percentage of MRAs Percentage of MRAs
listing reputation risk
Year listing reputation risk not listing reputation
as a secondary
as a primary concern as a concern
concern
2016 ......................................................................................................... 0.65 2.14 97.21
2017 ......................................................................................................... 1.50 23.96 74.54
2018 ......................................................................................................... 1.68 20.44 77.87
2019 ......................................................................................................... 2.02 18.71 79.27
2020 ......................................................................................................... 1.88 19.91 78.21
2021 ......................................................................................................... 1.43 19.07 79.50
2022 ......................................................................................................... 1.10 19.60 79.30
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2023 ......................................................................................................... 1.21 17.73 81.06
2024 ......................................................................................................... 0.65 14.68 84.67
2025 ......................................................................................................... 0.00 2.19 97.81
15 Based on data accessed using FINDRS on 16 The OCC notes that there has recently been a in the future. The OCC assesses that this decrease
March 11, 2025. decrease in the overall number of MRAs that in current and future MRAs is due to reductions in
institutions currently face and are expected to face MRAs due to other factors than this final rule.
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Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations 18289
TABLE 1—PERCENTAGE OF MRA LISTED AS REPUTATION RISK, BY PRIMARY OR SECONDARY CONCERN—Continued
Percentage of MRAs
Percentage of MRAs Percentage of MRAs
listing reputation risk
Year listing reputation risk not listing reputation
as a secondary
as a primary concern as a concern
concern
2026 ......................................................................................................... 0.00 0.00 100.00
Total .................................................................................................. 1.25 15.97 82.77
ii. Benefits From Increased Business also interprets the study’s results as Taken together, the average
Opportunities implying that it is possible that harm to subjectivity scores and the score
The impact of the rule on regulated customers would have been greater if a histograms are consistent with the
institutions will depend on the extent to larger fraction of banks had been hypothesis that reputation risk related
which reputation risk concerns from pressured to decrease lending or supervision could have been more
regulators may have impacted regulated terminate relationships with affected subjective. Therefore, to the extent that
institutions’ behavior in response to firms as this would have reduced the past supervisory text reflects what
regulatory expectations of institutions in supply of alternative financing that supervision would have been in the
managing reputation risk. Based on would have been available to the absence of the rule, the analysis suggests
supervisory experience, the OCC affected firms. that the rule could benefit regulated
expected that regulated institutions may The OCC concludes the rule may institutions by making supervision less
have internally perceived supervisory benefit institutions and their customers subjective and more objectively and
expectations regarding reputation risk as by eliminating perceived constraints on consistently applied.
a factor in their business decisions. That institutions’ decisions that could have iv. Perceptions That Eliminating the Use
is, institutions may have let perceptions arisen from institutions’ perception of of Reputation Risk Information for Risk
regarding regulatory assessments of regulators’ expectations regarding Monitoring Could Threaten the Safety
reputation risks influence their reputation risks in the absence of the and Soundness of the National Banking
decisions as to whether they would rule. System
engage in or continue customer
iii. Benefits From Less Subjective To address concerns that the removal
relationships. As a consequence,
Supervision of reputation risk from supervision
institutions may have refrained from
entering into or continuing profitable One additional benefit from the threatens the safety and soundness of
business relationships with law-abiding removal of reputation risk is greater the banking system or that the OCC may
customers that they may have consistency and objectivity of lose information on reputation risks that
maintained in the absence of implicit supervisory decisions. This, in turn, is needed to identify risks to the safety
supervisory expectations. would increase the predictability for and soundness of the banking system,
For example, the final rule cites regulated institutions to understand and the OCC used historical data observed
several congressional reports that manage regulators’ supervisory prior to the regulatory baseline to create
suggest that there were isolated episodes expectations. estimated forecast models that predict
where Federal regulators allegedly In its analysis, the OCC quantitatively bank failures based on the OCC Risk
pressured institutions to cease compared the subjectivity of OCC Assessment System (RAS) reputation
providing services to legal businesses, supervisory text that mentions the word risk rating while controlling for both
based on ‘‘reputational risk’’ concerns reputation to supervisory texts that do other regulatory risk ratings and for
that these businesses presumably posed not mention the word reputation. The observed risk factors from institutions’
to these institutions. OCC used standard natural language FFIEC 031 Call Report data filings.
In addition, a study by Sachdeva et The analysis shows that reputation
processing algorithms 18 to calculate a
al.,17 shows that reputation risk risk ratings do not forecast bank failures
subjectivity score for individual OCC
concerns emphasized by regulators at a when one controls for data on OCC’s
supervisory texts. The analysis
small number of targeted institutions CAMELS regulatory ratings. Because
calculated the subjectivity score for each
over a short period of time may have reputation risk RAS ratings do not
individual text document, and the
decreased lending to and/or terminated appear to have any significant
relationships with affected firms that scores range from 0 to 1 with scores
closer to 1 being indicative of more predictive power for bank failures in
were deemed controversial by regulators this analysis, the OCC believes that this
and law enforcement. The study’s subjective text. For supervisory event
text, the analysis calculated an average analysis at least somewhat alleviates
results, however, also suggest that the concerns that an end to reputation risk
firms were not irreparably harmed as subjectivity score of 0.41 for text that
mentions reputation and an average assessments will cause an increase in
these firms were able to obtain bank failure risk or that the OCC will
substitute credit through other non- score of 0.28 for supervisory event text
that does not mention reputation. For lose information useful to anticipate
targeted banks under similar terms. failure risks. However, the OCC
However, the OCC interprets the study’s the MRA text data, the analysis
calculated average subjectivity scores of acknowledges that no empirical analysis
results as implying that borrowers could completely assuage such
0.43 and 0.33 from text that mentions
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incurred costs that resulted from having concerns.
to find alternative financing. The OCC and does not mention reputation,
respectively. In addition, the OCC notes that in its
17 Kunal Sachdeva, André F. Silva, Pablo Slutzky,
analysis, there was not any evidence
Billy Y. Xu, ‘‘Defunding controversial industries: 18 Specifically, the OCC used the Python that MRAs that focus on or mention
Can targeted credit rationing choke firms?’’ Journal TextBlob package which calculates a subjectivity reputation risk forecast institutions’
of Financial Economics, Volume 172 (2025). score based on the text provided. failures.
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18290 Federal Register / Vol. 91, No. 69 / Friday, April 10, 2026 / Rules and Regulations
B. FDIC Expected Effects supervised IDIs may incur some conduct or sponsor, nor is the
This analysis utilizes all regulations voluntary costs associated with making respondent required to respond to, an
and guidance applicable to FDIC- changes to their compliance policies information collection unless it displays
supervised insured depository and procedures. a currently valid Office of Management
The FDIC does not have the and Budget (OMB) control number. The
institutions (IDIs), as well as
information necessary to quantify the agencies have reviewed this rule and
information on the financial condition
number of instances, or the associated determined that it does not create any
of IDIs as of the quarter ending
costs, where an FDIC-supervised IDI or information collection or revise any
September 30, 2025, as the baseline to
associated person was subject to a existing collection of information.
which the effects of the final rule are
covered adverse action or prohibition Accordingly, no PRA submissions to
estimated.
against certain business relationships. OMB will be made with respect to this
As discussed previously, the final rule
Nor does the FDIC have the information rule.
will prohibit the FDIC from criticizing,
necessary to quantify the number of
formally or informally, or taking adverse B. Regulatory Flexibility Act Analysis
FDIC-supervised IDIs that might make
action against an institution on the basis OCC:
changes to their compliance policies
of reputation risk. The final rule will In general, the Regulatory Flexibility
and procedures. The FDIC believes that
also prohibit the FDIC from requiring, the aggregate economic effect of any Act (RFA) 21 requires an agency, in
instructing, or encouraging an such indirect benefits or costs is connection with a rule, to prepare a
institution to discontinue doing unlikely to be substantive. regulatory flexibility analysis describing
business with, initiate doing business As mentioned previously, the FDIC is the impact of the rule on small entities
with, modify the terms under which it making two changes from the proposed (defined by the U.S. Small Business
will do business with a person or entity, rule. First, the FDIC is making a minor Administration (SBA) for purposes of
or take any action or refrain from taking clarifying change in response to the RFA to include commercial banks
any action on the basis of the person’s comments regarding the meaning of the and savings institutions with total assets
or entity’s political, social, cultural, or word ‘‘supervisor’’ in 12 CFR 302.100(f). of $850 million or less and trust
religious views or beliefs, Second, the FDIC is revising the companies with total assets of $47
constitutionally protected speech, or definition of ‘‘reputation risk’’ in 12 million or less). However, under section
solely on the basis of the person’s or CFR 302.100(g) to include a specific 605(b) of the RFA, this analysis is not
entity’s involvement in politically reference to operational risk. The FDIC required if an agency certifies that the
disfavored but lawful business activities does not expect that these changes will rule would not have a significant
perceived to present reputation risk. have material economic effects. Both economic impact on a substantial
Finally, the final rule will forbid the revisions would clarify the text of the number of small entities and publishes
FDIC from taking any supervisory action regulation and reduce possible its certification and a short explanatory
or other adverse action against an confusion. statement in the Federal Register along
institution, a group of institutions, or One commenter suggested that IDIs with its rule.
the institution-affiliated parties of any would need to undertake substantial The OCC currently supervises
institution that is designed to punish or revisions to internal policies, training, approximately 609 small entities, all of
discourage an individual or group from and procedures, among other things, as which may be indirectly impacted by
engaging in any lawful political, social, a result of the final rule. However, the the rule.22 In general, the OCC classifies
cultural, or religious activities, final rule applies only to the activities the economic impact on an individual
constitutionally protected speech, or, for of the FDIC and does not require IDIs to small entity as significant if the total
political reasons, lawful business undertake any action. estimated impact in one year is greater
activities that the FDIC or its personnel than 5 percent of the small entity’s total
disagree with or disfavor. C. Alternatives Considered annual salaries and benefits or greater
As of the quarter ending September The agencies considered adopting the than 2.5 percent of the small entity’s
30, 2025, the FDIC supervised 2,778 proposed rule without changes. total non-interest expense. Furthermore,
IDIs.19 The final rule will indirectly However, the agencies made two minor the OCC considers 5 percent or more of
benefit FDIC-supervised IDIs or changes. As discussed above, these OCC-supervised small entities to be a
associated persons to the extent they changes clarify the text of the regulation substantial number. Thus, at present, 30
would have been the subject of an to express the FDIC’s original intent OCC-supervised small entities would
adverse action or prohibition against when drafting the proposed rule and constitute a substantial number.
certain business relationships by the thus would have greater net benefits While the OCC expects that the rule
agencies on the basis of reputation risk; relative to the proposed rule. could result in substantial cost savings
political, social, cultural, or religious The agencies also considered the for all OCC-regulated institutions in the
views and beliefs; constitutionally suggestions made by commenters that aggregate, the OCC does not expect that
protected speech; or politically included alternatives to the final rule.
disfavored but lawful business activities For a complete discussion of such 21 5 U.S.C. 601 et seq.
perceived to present reputation risk. comments, see section IV. Overview of 22 The OCC bases its estimate of the number of
Final Rule. For the reasons articulated small entities on the SBA’s size thresholds for
This benefit will result from the FDIC- commercial banks and savings institutions, and
supervised IDI or associated person in the aforementioned section (and trust companies, which are $850 million and $47
avoiding costs associated with such above), the agencies believe the final million, respectively. Consistent with the General
adverse actions or prohibitions. The rule is preferred over the alternatives. Principles of Affiliation, 13 CFR 121.103(a), The
OCC counts the assets of affiliated financial
final rule may also improve the VI. Administrative Law Matters
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institutions when determining if it should classify
efficiency and effectiveness of the an OCC-supervised institution as a small entity. The
FDIC’s supervisory programs, which A. Paperwork Reduction Act