Regulators Drop Reputation Risk From Bank Supervision Rules
The OCC and FDIC issued a final rule eliminating reputation risk from bank supervision.
Why it matters: Legal counsel at banks and financial institutions must now adjust compliance protocols to a regulatory framework focused solely on tangible financial and operational risks. The change could impact how banks manage client relationships and respond to agency scrutiny.
- The rule was finalized jointly by the OCC and FDIC on April 7, 2026.
- It prohibits using reputation risk as grounds for supervisory criticism or adverse action.
- Agencies can no longer encourage banks to take action against clients based on constitutionally protected views or lawful business activities.
- The rule takes effect 60 days after publication in the Federal Register.
On April 7, 2026, the OCC and FDIC finalized a rule that will reshape how banks are supervised, eliminating the use of 'reputation risk' from the criteria regulators can use to evaluate and pressure financial institutions.
- The final regulation defines 'reputation risk' as risk to public perception unrelated to a bank’s financial or operational health.
- It prohibits the agencies from citing reputation risk as a basis for regulatory criticisms or any adverse action.
- Supervisors are also barred from instructing or pressuring banks to take actions—such as closing customer accounts—because of political, social, or religious views, constitutionally protected speech, or lawful business activities otherwise seen as controversial.
The rule responds to concerns highlighted in Executive Order 14331, which cited worries that reputation risk assessments can serve as a pretext to deny access to banking based on political or religious grounds.
Top officials called out the previous approach: "Reputation risk is not a sound basis for supervision," said Jonathan V. Gould, Comptroller of the Currency. FDIC Chairman Travis Hill added that focusing on untethered reputation risk can "pressure banks into debanking law-abiding customers who are viewed unfavorably by supervisors."
The rule will take effect 60 days after publication in the Federal Register, requiring immediate updates to compliance programs and supervisory interactions across the U.S. banking sector.