On April 7, 2026, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) jointly issued a final rule (Final Rule) codifying the elimination of reputation risk from their supervisory programs – a shift in the agencies’ supervisory philosophy that places limits on how examiners may evaluate regulated institutions. The Final Rule takes effect June 9, 2026.
The Final Rule prohibits the agencies from criticizing or taking adverse action against an institution on the basis of “reputation risk,” which is defined as any risk that could “negatively impact public perception of the institution for reasons not clearly and directly related to the financial or operational condition of the institution.” 12 CFR § 4.91(g) (OCC); 12 CFR § 302.100(g) (FDIC). This definition expressly carves out public perception concerns that are tied to an institution’s actual financial or operational condition, which the agencies attribute to fundamental financial concerns rather than non-financial reputational issues.
The Final Rule defines “adverse action” expansively to include, among other things:
- negative feedback in a report of examination,
- a memorandum of understanding,
- verbal feedback,
- an enforcement action,
- a downgrade of any supervisory rating,
- a denial of a filing or licensing application, and
- any imposition of a capital requirement above minimum ratios.
Explaining its rationale, the Final Rule notes that the use of reputation risk as a basis for supervisory criticisms “increases subjectivity in banking supervision without adding material value from a safety and soundness perspective.” Because the agencies have not been able to clearly articulate the criteria for which activities or clients are deemed to present a reputation risk, supervision has been inconsistent and has at times “reflected individual perspectives of agency staff rather than data-driven conclusions.”
The Final Rule also addresses “debanking” – the practice of pressuring banks to close customer accounts based on a person’s political, religious, or social views, constitutionally protected speech, or lawful (but politically disfavored) business activities. The Final Rule responds to concerns expressed in Executive Order 14331, Guaranteeing Fair Banking for All Americans, that 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.”
Financial institutions that serve, or have considered serving, industries historically subjected to examiner pressure now have a regulatory backstop against that pressure. While the Final Rule does not compel banks to do or avoid any particular business, it removes a key tool that examiners used, often subjectively, to influence those decisions. Financial institutions should assess whether past account closure or de-risking decisions were shaped by reputation risk concerns and consider what the new supervisory landscape means for their existing and prospective customer relationships.
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