On April 7, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) issued a final rule to remove “reputation risk” from their supervisory and examination frameworks and sharply limit their ability to influence banks’ customer relationships based on political or ideological grounds. This final rule is a central implementation step for President Trump’s debanking initiative under Executive Order 14331, “Guaranteeing Fair Banking for All Americans,” which aims to address concerns about financial institutions improperly restricting access to banking services based on customers’ political, religious, or ideological beliefs.

The OCC, FDIC, and Federal Reserve Board (FRB) had previously committed to removing “reputation risk” from their supervisory programs, but the OCC and the FDIC are the first agencies to finalize a rule that does so. The FRB is on track to finalize its own rule, as it issued a proposed rule to codify similar regulatory constraints on February 23, 2026.

What the OCC/FDIC Final Rule Does

The OCC/FDIC final rule does three things of practical significance. First, it formally eliminates “reputation risk” as a stand-alone supervisory risk category. The agencies explain that, based on their experience, reputation risk has not proven useful in predicting bank failures or enhancing safety and soundness, and instead has injected a high degree of subjectivity into examinations. They note that traditional risk channels, such as credit, liquidity, market, and operational risk, are more concrete and measurable, and that the use of these factors adequately addresses real threats to institutions’ financial conditions and compliance with applicable laws.

Second, the rule prohibits the OCC and FDIC from criticizing or taking adverse action against an institution “on the basis of reputation risk.” Adverse action is defined broadly to include negative language in exam reports, Matters Requiring Attention, rating downgrades (including CAMELS, compliance, and IT ratings), enforcement actions, conditions placed on approvals, capital requirements above minimums, and other decisions that negatively affect a bank. The agencies also adopt a catch-all standard covering any action where the intent is to pressure a bank into addressing perceived reputation risk.

Third, the rule bars the OCC and FDIC from requiring, instructing, or encouraging institutions to close accounts, refuse service, or modify or terminate relationships based on a customer’s political, social, cultural, or religious views or beliefs, constitutionally protected speech, or solely on the basis of politically disfavored but lawful business activities. The agencies further forbid supervisory or other adverse actions designed to discourage individuals or groups from engaging in lawful political, social, cultural, or religious activities, protected speech, or lawful business activities that the agency or its personnel “disagree with or disfavor,” or that are designed to punish individuals or groups for doing so. In the final rule, this prohibition is deliberately framed to capture bias by any agency personnel, not just “supervisors,” making clear that ideological preferences anywhere within the agency cannot be a legitimate basis for supervisory pressure.

Reputation Risk Definition Narrowed

To preserve appropriate supervisory authority over genuine financial and operational concerns, the final rule adopts a narrow definition of “reputation risk.” Specifically, the rule defines reputation risk as “any risk, regardless of how the risk is labeled by the institution or regulators, that an action or activity, or combination of actions or activities, or lack of actions or activities, of an institution could negatively impact public perception of the institution for reasons not clearly and directly related to the financial or operational condition of the institution.” By inserting “financial or operational condition” into the definition, the agencies underscore that they remain free to address public concerns over solvency, liquidity, earnings, risk management, cyber resilience, and similar matters that can directly affect safety and soundness.

At the same time, the agencies explicitly disclaim the use of “reputation risk” as a way to evaluate or predict public opinion on controversial political, social, or religious issues, or to link those perceptions to supervisory outcomes. They conclude that trying to forecast public sentiment in that way has not improved safety and soundness, has diverted resources from core risks, and has made supervision less predictable and more vulnerable to individual examiner bias.

Implementation of President Trump’s Debanking Initiative

The final rule is expressly framed as a response to concerns articulated in Executive Order 14331 about “politicized or unlawful debanking.” The preamble recounts longstanding criticisms that, during prior administrations, regulators have allegedly used reputation risk to pressure banks to exit certain lawful industries, referencing episodes such as Operation Choke Point and more recent allegations involving digital assets, firearms, and other politically sensitive businesses. The agencies acknowledge that supervisory pressure framed as “reputation risk” can distort markets by effectively “picking winners and losers” among lawful businesses, limit access to banking services for disfavored but legal sectors, and erode public confidence in regulators’ neutrality.

By codifying that they are not permitted to require or encourage debanking based on political or ideological views, or on lawful but disfavored activities perceived as reputationally sensitive, the OCC and FDIC have positioned this rule as a key mechanism to implementing the administration’s fair banking and anti-debanking agenda. Importantly, however, the rule regulates only the agencies’ conduct and does not impose any obligations on supervised entities. For example, it does not require banks to serve any particular customer or industry, nor does it restrict banks from considering reputational or franchise risk in their private business decisions, so long as those decisions are not the product of improper regulatory pressure.

The FRB’s Proposed Rule

The FRB’s proposed rule, issued on February 23, 2026, reflects a similar policy direction but is behind the OCC and FDIC in finality and timing. In its proposal, the FRB notes that in June 2025 it removed “reputation risk” as a component of its examination programs. The new proposal would codify that change and make explicit that the FRB will not prohibit banks from serving customers engaged in lawful activities solely because of concerns about reputation risk and will not penalize banks for doing so.

In announcing the proposal, Vice Chair for Supervision Michelle Bowman referenced “troubling cases of debanking” where supervisors allegedly used reputation risk to pressure banks to sever relationships based on customers’ political or religious views or their involvement in disfavored but legal businesses. She characterized such discrimination as unlawful and incompatible with the FRB’s supervisory role. Like the OCC and FDIC, the FRB emphasizes that this shift does not relax expectations around strong risk management, safety and soundness, or compliance with law. Rather, this reflects an effort to refocus supervision on material financial risk and to increase clarity and precision in supervisory decision-making.

Once finalized, the FRB’s rule would bring its formal regulatory posture into alignment with its June 2025 policy shift and, substantively, into closer alignment with the OCC and FDIC’s now-final rule.