Prohibition on Use of Reputation Risk by Regulators

DEPARTMENT OF THE TREASURY <SUBAGY>Office of the Comptroller of the Currency</SUBAGY> <CFR>12 CFR Parts 1, 4, and 30</CFR> <DEPDOC>[Docket ID OCC-2025-0142]</DEPDOC> <RIN>RIN 1557-AF34</RIN> FEDERAL DEPOSIT INSURANCE CORPORATION <CFR>12 CFR Parts 302 and 364</CFR> <RIN>RIN 3064-AG12</RIN> <SUBJECT>Prohibition on Use of Reputation Risk by Regulators</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of the Comptroller of the Currency, Treasury, and Federal Deposit Insurance Corporation. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) are issuing a notice of proposed rulemaking to codify the elimination of reputation risk from their supervisory programs. Among other things, the proposed rule would 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 an account, to refrain from providing an account, product, or service, or to modify or terminate any product or service 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. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received on or before December 29, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Comments should be directed to the agencies as follows: <E T="03">OCC:</E> Commenters are encouraged to submit comments through the Federal eRulemaking Portal. Please use the title “Prohibition on Use of Reputation Risk by Regulators” to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods: • <E T="03">Federal eRulemaking Portal—Regulations.gov:</E> Go to <E T="03">https://regulations.gov/.</E> Enter Docket ID “OCC-2025-0142” in the Search Box and click “Search.” Public comments can be submitted via the “Comment” box below the displayed document information or by clicking on the document title and then clicking the “Comment” box on the top-left side of the screen. For help with submitting effective comments, please click on “Commenter's Checklist.” For assistance with the <E T="03">Regulations.gov</E> site, please call 1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. EST, or email <E T="03">regulationshelpdesk@gsa.gov.</E> • <E T="03">Mail:</E> Chief Counsel's Office, Attention: Comment Processing, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219. • <E T="03">Hand Delivery/Courier:</E> 400 7th Street SW, Suite 3E-218, Washington, DC 20219. <E T="03">Instructions:</E> You must include “OCC” as the agency name and Docket ID “OCC-2025-0142” in your comment. In general, the OCC will enter all comments received into the docket and publish the comments on the <E T="03">Regulations.gov</E> website without change, including any business or personal information provided such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials that pertain to this action by the following method: • <E T="03">Viewing Comments Electronically—Regulations.gov:</E> Go to <E T="03">https://regulations.gov/.</E> Enter Docket ID “OCC-2025-0142” in the Search Box and click “Search.” Click on the “Dockets” tab and then the document's title. After clicking the document's title, click the “Browse All Comments” tab. Comments can be viewed and filtered by clicking on the “Sort By” drop-down on the right side of the screen or the “Refine Comments Results” options on the left side of the screen. Supporting materials can be viewed by clicking on the “Browse Documents” tab. Click on the “Sort By” drop-down on the right side of the screen or the “Refine Results” options on the left side of the screen checking the “Supporting & Related Material” checkbox. For assistance with the <E T="03">Regulations.gov</E> site, please call 1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. EST, or email <E T="03">regulationshelpdesk@gsa.gov.</E> The docket may be viewed after the close of the comment period in the same manner as during the comment period. <E T="03">FDIC:</E> You may submit comments to the FDIC, identified by RIN 3064-AG12, by any of the following methods: • <E T="03">Agency Website: https://www.fdic.gov/federal-register-publications.</E> Follow instructions for submitting comments on the FDIC's website. • <E T="03">Email: comments@FDIC.gov.</E> Include RIN 3064-AG12 in the subject line of the message. • <E T="03">Mail:</E> Jennifer M. Jones, Deputy Executive Secretary, Attention: Comments—RIN 3064-AG12, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. • <E T="03">Hand Delivery/Courier:</E> Comments may be hand-delivered to the guard station at the rear of the 550 17th Street NW building (located on F Street NW) on business days between 7 a.m. and 5 p.m. <E T="03">Public Inspection:</E> Comments received, including any personal information provided, may be posted without change to <E T="03">https://www.fdic.gov/federal-register-publications.</E> Commenters should submit only information they wish to make available publicly. The FDIC may review, redact, or refrain from posting all or any portion of any comment that it may deem to be inappropriate for publication, such as irrelevant or obscene material. The FDIC may post only a single representative example of identical or substantially identical comments, and in such cases will generally identify the number of identical or substantially identical comments represented by the posted example. All comments that have been redacted, as well as those that have not been posted, that contain comments on the merits of this notice will be retained in the public comment file and will be considered as required under all applicable laws. All comments may be accessible under the Freedom of Information Act. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> <E T="03">OCC:</E> Jonathan Fink, Director, Bank Advisory, Joanne Phillips, Counsel, or Collin Berger, Attorney, Chief Counsel's Office, (202) 649-5490, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219. If you are deaf, hard of hearing or have a speech disability, please dial 7-1-1 to access telecommunications relay services. <E T="03">FDIC:</E> Legal Division: Sheikha Kapoor, Assistant General Counsel, (202) 898-3960; James Watts, Counsel, (202) 898-6678. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background and Policy Objectives</HD> The agencies believe that banking regulators' use of the concept of reputation risk as a basis for supervisory criticisms increases subjectivity in banking supervision without adding material value from a safety and soundness perspective. Although the agencies recognize the importance of a bank's reputation, most activities that could negatively impact an institution's reputation do so through traditional risk channels ( <E T="03">e.g.,</E> credit risk, market risk, and operational risk, among others) on which supervisors already focus and already have sufficient authority to address. At the same time, supervising for reputation risk as a standalone risk adds substantial subjectivity to bank supervision and can be abused. It also diverts bank and agency resources from more salient risks without adding material value from a safety and soundness perspective. To improve the efficiency and effectiveness of their supervisory programs, the agencies have removed reputation risk from their supervisory frameworks and are proposing to codify this change in relevant regulations. This change would also respond to concerns expressed in Executive Order 14331, Guaranteeing Fair Banking for All Americans, <SU>1</SU> <FTREF/> 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. <FTNT> <SU>1</SU>  90 FR 38925 (Aug. 7, 2025). </FTNT> The agencies' supervisory experience has shown that the use of reputation risk in the supervisory process does not increase the safety and soundness of supervised institutions because supervisors have little ability to predict <E T="03">ex ante</E> whether or how certain activities or customer relationships present reputation risks that could threaten the safety and soundness of an institution. <SU>2</SU> <FTREF/> In contrast, risks like credit risk and liquidity risk are more concrete and measurable and allow examiners to more objectively assess a banking institution's financial condition. Assessments of these risks may reflect perceptions of a bank's financial condition consistent with objective principles. Conversely, an independent consideration of reputation risk by examiners has not resulted in consistent or predictable assessments of material financial risk. Instead, by focusing on reputation risk, the agencies have instructed examiners to attempt to map events to public opinion and then public opinion to an institution's condition in ways that have prov ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 81k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━