FDIC, OCC Bar Reputation Risk as Debanking Basis Starting June 6

The FDIC and OCC just banned reputation risk as a basis for bank supervision. The joint final rule, effective June 6, prohibits both agencies from criticizing institutions on reputation grounds or directing them to close customer accounts because of a customer’s political, religious, or social views.

It’s a categorical ban. Supervisory action can’t be designed to punish “lawful business activities that the agencies or its personnel disagree with or disfavor.” FDIC Chairman Travis Hill said a focus on reputation risk outside traditional channels “can pressure banks into debanking law-abiding customers.”

Comptroller Jonathan V. Gould agreed regulators and banks have used the concept as “a pretext for decisions that have nothing to do with safety and soundness, financial risk, or even BSA/AML compliance.”

The rule follows Trump’s August 7 Executive Order, “Guaranteeing Fair Banking for All Americans,” which directed banking agencies to stop treating reputation risk as a gatekeeping tool.

The FDIC and OCC aren’t alone in this pivot. The Fed has announced it’s eliminating reputation risk from examination programs and has a proposed rule out for comment. The NCUA has issued its own NPRM, and the OCC started pulling reputation risk language from its handbooks back in March 2025.

What changes on June 6: businesses operating in politically disfavored but lawful industries get a concrete rule to cite if a regulator pressures their bank. The real question is whether the Federal Reserve finalizes its own rule before a future administration finds new uses for the old framework.

— Marcus Webb