The Federal Reserve Board quietly rewrote a core piece of how it grades the safety of the banks it supervises. In June 2025, the Board announced that reputation risk would no longer count as its own category in examination ratings, ordering the phrase struck from manuals and rating guidance. Nearly a year later, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation followed with an actual regulation carrying the same effect, while the Fed’s own attempt to write the change into a formal rule is still working through the federal rulemaking process. For older account holders who have watched a bank abruptly close an account tied to a lawful but disfavored business or belief, the sequence matters because it changes what an examiner is allowed to hold against a bank, without changing what a bank is required to do.
Reputation Risk Exits the Fed’s Bank Examination Manuals
Bank examiners have long rated financial institutions across categories such as capital, asset quality, management, earnings, and liquidity. Reputation risk sat alongside those categories as a softer, harder-to-define measure — a bank could be marked down not because a loan portfolio was unsound, but because an examiner judged that doing business with a certain customer, industry, or political constituency might embarrass the institution. Critics inside and outside government argued for years that the category let subjective judgment substitute for evidence of measurable financial harm, and that it gave examiners informal leverage to pressure banks into cutting off lawful customers.
The Federal Reserve Board acted on that criticism on June 23, 2025, announcing that reputational risk would no longer be a component of examination programs in its supervision of banks. The Board said it had begun reviewing and removing references to reputation and reputational risk from its supervisory materials, including examination manuals, replacing them where appropriate with more specific discussions of financial risk, and that examiners would be trained to apply the change consistently across Board-supervised institutions. The same afternoon, the Board issued a revised edition of SR 95-51, its long-standing guidance for rating risk management at state member banks and bank holding companies, striking references to reputational risk from that framework. The Board was careful to add that the change does not alter its expectation that banks maintain strong risk management to ensure safety, soundness, and compliance with law, and that it is not intended to affect how banks use reputational risk in their own internal decisions — the shift changes only what an examiner may formally cite against a bank.
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OCC and FDIC Turn the Same Idea Into a Binding Rule
The Fed’s 2025 change was an internal supervisory policy, not a regulation with the force of law, and in theory a future Board could reverse it the same way it was adopted. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation went a step further. On April 7, 2026, the two agencies issued a joint final rule formally prohibiting examiners from citing reputation risk as a basis for supervisory criticism or enforcement action against the national banks, federal savings associations, and state nonmember banks they supervise — a group that includes most of the country’s community and mid-size banks. The rule was published in the Federal Register on April 10, 2026, and took effect June 9, 2026, which means the prohibition now carries the weight of binding regulation rather than guidance a later set of officials could quietly walk back.
The Fed’s Own Rule Is Still Just a February 2026 Proposal
The Federal Reserve has not yet matched the OCC and FDIC with a rule of its own carrying that same legal force. On February 23, 2026, the Board requested public comment on a proposal that would bar the Fed from using reputation risk, or any other supervisory tool, to encourage or compel a Board-supervised bank to deny or condition services to a person or business based on constitutionally protected political or religious beliefs, associations, or speech, or based on involvement in a lawful but politically disfavored line of business. The comment period on that proposal closed April 27, 2026. As of the most recent public record, the Board had not entered a notice finalizing the rule, leaving the Fed’s 2025 examination change resting on internal policy while the OCC and FDIC now operate under an actual regulation covering the same ground.
What Ending “Reputation Risk” Does Not Guarantee an Account Holder
None of these three actions creates a new right for a bank customer, and none requires a bank to open or keep open any particular account. What changes is narrower: an examiner can no longer cite reputation risk, standing alone, as grounds to press a bank into restricting a lawful customer’s access to services. A bank remains free to close an account for its own business reasons — compliance costs, fraud concerns, profitability — regardless of what an examiner is now permitted to consider.
That distinction matters most around debanking, the practice of a bank closing accounts tied to a disfavored industry, belief, or association. For an older customer, a closed account can interrupt automatic bill payments or strand a Social Security direct deposit until a new account is opened elsewhere, and neither the Fed’s 2025 announcement nor the OCC-FDIC rule obligates a bank to prevent that outcome. The Federal Register docket for the Board’s still-pending proposal remained open, with no finalization notice entered as of the most recent filing — the clearest sign that, for now, only the OCC and FDIC’s rule, in effect since June, carries the force of law on this specific question.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
