The Fed proposes to remove "reputational risk" from bank supervision

The U.S. Federal Reserve (Fed) has opened a 60-day public comment period on a proposal to permanently remove "reputational risk" from the banking supervision framework, formalizing a policy change first announced in June 2025. This move aims to ensure supervisory decisions are based on material financial risks rather than subjective reputation assessments.

Michelle W. Bowman, Vice Chair for Supervision, stated that recent cases have shown that reputational risk may have been used to pressure banks into cutting services to customers based on political views, religious beliefs, or legitimate business activities — which she affirmed is not appropriate within the supervisory framework.

Senator Cynthia Lummis welcomed the proposal, emphasizing that regulators should not decide which digital asset businesses have access to banking services. Republican senators on the Senate Banking Committee also agreed.

The debate occurs alongside President Donald Trump's commitment to end the so-called "Operation Choke Point 2.0," and his $5 billion lawsuit against JPMorgan Chase over past account closures. The proposal will be published in the Federal Register, with a 60-day comment period.