Fed Proposes Rule to Remove Reputation Risk from Bank Supervision
The Federal Reserve Board has initiated a proposal to eliminate 'reputation risk' from its bank supervision framework, marking a significant shift in regulatory oversight. The MOVE aims to refocus examiners on material financial and compliance risks, rather than subjective assessments of reputational impact.
Public comments on the proposal will be accepted for 60 days following Federal Register publication. Vice Chair for Supervision Michelle W. Bowman emphasized the policy change addresses concerns about 'debanking'—where financial institutions allegedly cut services based on political views or lawful business activities.
The Fed's action follows June 2026 steps to remove the concept from examination programs. Bowman stated: 'Discrimination based on reputation risk has no place in our supervisory framework.' The proposal seeks to standardize oversight by prioritizing quantifiable risks over qualitative judgments.
