Proposed Rule2025-19623
Prohibition on Use of Reputation Risk by NCUA
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 21, 2025
Issuing agencies
National Credit Union Administration
Abstract
The National Credit Union Administration Board (Board) is issuing a notice of proposed rulemaking to codify the elimination of reputation risk from its supervisory program. Among other things, the proposed rule would prohibit the agency from criticizing or taking adverse action against an institution, defined as an entity for which the NCUA makes or will make supervisory determinations or other decisions, either solely or jointly on the basis of reputation risk. The proposed rule would also prohibit the agency from requiring, instructing, or encouraging an institution to close an account, to refrain from providing an account, product, or service, or to modify or terminate any product or service on the basis of a person or entity's political, social, cultural, or religious views or beliefs, constitutionally protected speech, or on the basis of politically disfavored but lawful business activities perceived to present reputation risk.
Full Text
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[Federal Register Volume 90, Number 201 (Tuesday, October 21, 2025)]
[Proposed Rules]
[Pages 48409-48414]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-19623]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 90, No. 201 / Tuesday, October 21, 2025 /
Proposed Rules
[[Page 48409]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 702 and 791
RIN 3133-AF67
Prohibition on Use of Reputation Risk by NCUA
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
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SUMMARY: The National Credit Union Administration Board (Board) is
issuing a notice of proposed rulemaking to codify the elimination of
reputation risk from its supervisory program. Among other things, the
proposed rule would prohibit the agency from criticizing or taking
adverse action against an institution, defined as an entity for which
the NCUA makes or will make supervisory determinations or other
decisions, either solely or jointly on the basis of reputation risk.
The proposed rule would also prohibit the agency from requiring,
instructing, or encouraging an institution to close an account, to
refrain from providing an account, product, or service, or to modify or
terminate any product or service on the basis of a person or entity's
political, social, cultural, or religious views or beliefs,
constitutionally protected speech, or on the basis of politically
disfavored but lawful business activities perceived to present
reputation risk.
DATES: Comments must be received by December 22, 2025.
ADDRESSES: Comments may be submitted in one of the following ways.
(Please send comments by one method only):
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
The docket number for this proposed rule is NCUA-2025-0972. Follow the
``Submit a comment'' instructions. If you are reading this document on
<a href="http://federalregister.gov">federalregister.gov</a>, you may use the green ``SUBMIT A PUBLIC COMMENT''
button beneath this rulemaking's title to submit a comment to the
<a href="http://regulations.gov">regulations.gov</a> docket. A plain language summary of the proposed rule
is also available on the docket website.
<bullet> Mail: Address to Melane Conyers-Ausbrooks, Secretary of
the Board, National Credit Union Administration, 1775 Duke Street,
Alexandria, Virginia 22314-3428.
<bullet> Hand Delivery/Courier: Same as mailing address. Mailed and
hand-delivered comments must be received by the close of the comment
period.
<bullet> Public Inspection: Please follow the search instructions
on <a href="https://www.regulations.gov">https://www.regulations.gov</a> to view the public comments. Do not
include any personally identifiable information (such as name, address,
or other contact information) or confidential business information that
you do not want publicly disclosed. All comments are public records;
they are publicly displayed exactly as received, and will not be
deleted, modified, or redacted. Comments may be submitted anonymously.
If you are unable to access public comments on the internet, you may
contact the NCUA for alternative access by calling (703) 518-6540 or
emailing <a href="/cdn-cgi/l/email-protection#4f00080c022e26230f212c3a2e61282039"><span class="__cf_email__" data-cfemail="f7b8b0b4ba969e9bb799948296d9909881">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Office of Examination and Insurance:
Michael Dondarski, Associate Director, at (703) 548-2638 or at 1775
Duke Street, Alexandria, VA 22314. Office of General Counsel: Kevin
Tuininga, Deputy General Counsel, Office of General Counsel, at (703)
518-6540 or at the above address.
SUPPLEMENTARY INFORMATION:
I. Background and Policy Objectives
Citing reputation risk as a basis for supervisory criticisms can
lead to inconsistency and subjectivity in the examination and
supervision process, without adding material value from a safety and
soundness perspective. To improve the efficiency and effectiveness of
the examination and supervision program, the NCUA has removed
reputation risk from its supervisory framework and is proposing to
codify this change through regulation. These actions align with the
requirements in Executive Order 14331, Guaranteeing Fair Banking for
All Americans,\1\ that notes the use of reputation risk can be a
pretext for restricting law-abiding individuals' and businesses' access
to financial services on the basis of political or religious beliefs or
disfavored but lawful business activities.
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\1\ 90 FR 38925 (Aug. 12, 2025).
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Because assessing reputation risk is subjective, it can lead to
confusion and is time-consuming to measure for both examiners and
credit unions. Reputation risk is ambiguous and lacks measurable
criteria, which leaves it too open to interpretation. Therefore, the
agency's supervision for reputation risk could reflect individual
perspectives rather than data-driven conclusions. Given the difficulty
of measuring reputation risk or quantifying its impact, if any, in an
accurate and precise way, it is inappropriate for the agency to examine
credit unions for this risk.
While is it important for a credit union to operate in a manner
that member-owners view as favorable, credit union management is
generally in the best position to identify the business decisions that
will positively influence the membership's perception or opinion of the
credit union. Examiners are not equipped and should not be expected to
gauge public opinion or quantify the impact of member perception on a
credit union's financial and operational condition. The highly
subjective nature of these determinations creates unpredictability and
inconsistency for regulated entities and introduces the potential for
political or other biases into the supervisory process. This could
result in examiners implicitly or explicitly encouraging or
discouraging credit unions to restrict access to credit union services
on the basis of examiners' personal views of a group's or individual's
political, social, cultural, or religious views or beliefs,
constitutionally protected speech, or politically disfavored but lawful
business activities. If a credit union alters its behavior to comply
with supervisory expectations relating to reputation risk management,
such as by closing an account or choosing not to enter into or continue
a business relationship with a member or accountholder that it would
otherwise maintain, it is forgoing an opportunity to maintain or build
a productive relationship within its authorized field of membership
that may otherwise be consistent with sound risk management practice.
[[Page 48410]]
Even though reputation risk has been assessed as part of NCUA's
examination and supervision program for decades, the agency has not
seen evidence of reputation risk being a primary driver of unsafe or
unsound conditions, or posing a material risk to the National Credit
Union Share Insurance Fund (Share Insurance Fund). From a safety and
soundness perspective, most activities that could negatively impact a
credit union's reputation do so through traditional risk channels (for
example, credit risk and liquidity risk, among others). These core
financial and operational risk areas are more concrete and measurable
and allow examiners to more objectively assess a credit union's safety
and soundness.
In addition to not enhancing safety and soundness, focusing on
reputation risk can distract credit unions and the agency from devoting
resources to managing core financial and operational risks that are
quantifiable and have been shown to present significant threats to
credit unions. In the judgment of the agency, examining for reputation
risk diverts resources that could be better spent on other risks that
have been shown to present significant, tangible threats to
institutions and that are more easily quantified and addressed through
regulatory intervention.
The NCUA is responsible for the supervision and examination of all
federally insured credit unions (FICUs), including for safety and
soundness principles.\2\ In furtherance of these objectives, the
agency's supervision should focus on concrete risks and more objective
criteria directly related to applicable statutory requirements. In the
agency's experience, using reputation risk in its supervisory process
does not further this mission.
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\2\ See, e.g., 12 U.S.C. 1756, 1781, 1784, 1786, 1789. The NCUA
also insures member accounts at all FICUs and manages liquidations
of insolvent FICUs.
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II. Legal Authority
Under the Federal Credit Union Act (FCU Act), the NCUA examines all
FICUs and is required to ensure that all FICUs operate safely and
soundly.\3\ In particular, 12 U.S.C. 1786(b) compels the agency to act
to correct unsafe or unsound conditions or practices in FICUs. Further,
under the FCU Act, the NCUA is the chartering and supervisory authority
for federal credit unions (FCUs) and the federal supervisory authority
for FICUs.\4\ The FCU Act grants the NCUA a broad mandate to issue
regulations governing both FCUs and FICUs. Section 120 of the FCU Act
is a general grant of regulatory authority, and it authorizes the Board
to prescribe rules and regulations for the administration of the FCU
Act.\5\ Section 207 of the FCU Act is a specific grant of authority
over share insurance coverage, conservatorships, and liquidations.\6\
Section 209 of the FCU Act is a plenary grant of regulatory authority
to the NCUA to issue rules and regulations necessary or appropriate to
carry out its role as share insurer for all FICUs.\7\ Accordingly, the
FCU Act grants the Board broad rulemaking authority to ensure the
credit union industry and the Share Insurance Fund remain safe and
sound. Also, the NCUA has statutory authority to determine whether
FICUs are operated in an unsafe or unsound manner and terminate a
FICU's insurance if a FICU is not operated in a safe or sound
manner.\8\ Finally, the Board has the authority to adopt such rules as
it sees fit for the transaction of its business, which includes
oversight of the NCUA's supervisory and examination programs.\9\
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\3\ There are several references to safety and soundness
principles in the Federal Credit Union Act. See 12 U.S.C.
1757(5)(A)(vi)(I), 1759(d) & (f), 1781(c)(2), 1782(a)(6)(B),
1786(b), 1786(e), 1786(f), 1786(g), 1786(k)(2), 1786(r), 1786(s),
and 1790d(h). Similarly, the NCUA requires FICUs to comply with
relevant consumer protection statutes and regulations. See, e.g. 12
CFR part 717--Fair Credit Reporting.
\4\ 12 U.S.C. 1751 et seq.
\5\ 12 U.S.C. 1766(a).
\6\ 12 U.S.C. 1787.
\7\ 12 U.S.C. 1789(a)(11).
\8\ 12 U.S.C. 1786.
\9\ 12 U.S.C. 1752a(d). Under 12 U.S.C. 1784, the Board appoints
examiners who shall have power, on the Board's behalf, to examine
any insured credit union.
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III. Description of the Proposed Rule and Changes
Based on the legal authorities set forth previously, the
subjectivity of reputation risk, the limited value of reputational risk
at identifying risks to safety and soundness or other statutory
mandates, and the potential for distracting examiners and institutions
from examining or managing core financial and operational risks, the
agency has removed reputation risk from its supervisory framework and
is proposing to codify this change in NCUA's regulations.\10\ This
proposed rule would be a regulation as defined in section 5 of
Executive Order 14192. The proposed rule would be a significant
regulatory action for the purposes of Executive Order 12866. The
proposed elimination of reputation risk supervision is deregulatory.
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\10\ This rule would not prohibit actions taken to ensure
compliance with statutory and regulatory field of membership
requirements.
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The proposed rule would not alter or affect the ability of an
institution to make business decisions regarding its members,
accountholders, or third-party arrangements and to manage them
effectively, consistent with safety and soundness and compliance with
applicable laws.
The proposed rule would prohibit the agency from criticizing,
formally or informally, rewarding, using in its decision-making
process, or taking any adverse action against institutions on the basis
of reputation risk. The agency would be prohibited from requiring,
instructing, or encouraging an institution or its employees, to refrain
from contracting with or to terminate or modify a contract with a third
party, including an institution-affiliated party, on the basis of
reputation risk. The agency also could not require, instruct, or
encourage an institution or its employees to refrain from doing
business with or to terminate or modify a business relationship with a
third party, including an institution-affiliated party, on the basis of
reputation risk. The proposed rule would also prevent the agency from
requiring, instructing, or encouraging an institution or its employees
to enter into a contract or business relationship with a third party on
the basis of reputation risk. The proposed rule would further prohibit
the agency from requiring, instructing, or encouraging an institution
or its employees to terminate a contract with, discontinue doing
business with, or modify the terms under which it will do business with
a person or entity on the basis of the person's or entity's political,
social, cultural, or religious views or beliefs, constitutionally
protected speech, or on the basis of the third party's involvement in
politically disfavored but lawful business activities perceived to
present reputation risk.
The proposed rule would also prevent the agency from requiring,
instructing, or encouraging an institution or its employees to engage
in or refrain from acquiring or terminating a relationship with any
person or entity within the credit union's authorized field of
membership, or person or entity the credit union or institution is
otherwise lawfully permitted to serve, on the basis of reputation risk.
This prohibition would not affect member service requirements and
limitations related to a credit union's field of membership. Similarly,
this prohibition would not affect requirements intended to prohibit or
reject transactions or accounts associated with Office of Foreign
Assets Control-sanctioned persons, entities, or jurisdictions. Such
prohibitions and rejections would not be based on the
[[Page 48411]]
person's or entity's political, social, cultural, or religious views or
beliefs, constitutionally protected speech, or politically disfavored
but lawful business activities perceived to present reputation risk.
The prohibition also does not affect the agency's authority to enforce
the requirements of the provisions of United States Code title 31,
chapter 53, subchapter II regarding reporting on monetary transactions,
field of membership requirements under the FCU Act, administration of
Community Development Revolving Loan Fund activities, or any other
application decision where federal law mandates the NCUA to consider
criteria such as character and fitness or integrity.\11\
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\11\ 15 U.S.C. 5311 et seq.
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``Adverse action,'' as defined by the proposed rule, would include
the provision of negative feedback, including written feedback in a
report of examination, a document of resolution, oral feedback, or an
enforcement action. This definition would only apply to NCUA-initiated
adverse actions. NCUA will often jointly examine federally insured,
state-chartered credit unions along with the state regulator. In these
instances, the state regulator generally will take the lead in issuing
the report of examination and any corrective action. If the state
regulator elects to examine for reputation risk, NCUA examiners will
not participate in these discussions or enforce any resulting
supervisory actions taken by the state regulator.
Furthermore, adverse action encompasses any NCUA-led action of any
agency employee, including any communication characterized as informal
or preliminary. A downgrade (or contribution to a downgrade) of any
supervisory rating, including a rating assigned under NCUA's CAMELS
ratings system \12\ also would constitute an ``adverse action'' under
the proposed rule. Further, an approval or denial of a filing, or an
imposition of a discretionary supervisory action under prompt
corrective action, on the basis of ``reputation risk'' would constitute
an ``adverse action'' under the proposed rule, except where federal law
requires consideration of reputation-related criteria. This includes
any burdensome requirements placed on an approval, the introduction of
additional approval requirements, or any other heightened requirements
or emphasis on an activity or change.
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\12\ For additional information on NCUA's CAMELS rating system,
please see Letter to Credit Unions 22-CU-05.
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The agency is also including a general ``catch-all'' for any other
actions, including approval or denial of applications, waivers, and
other agency actions or decisions for any party, that could impact the
party. This catch-all is meant to include actions such as decisions on
applications for waivers, applications to engage in certain business
activities for which supervisory permission is required, or other
regulatory decisions affecting institutions. The agency believes that
most actions would be covered under the other definitions outlined in
the regulation but has included this additional ``catch-all'' to
account for any circumstances that may not be apparent or may become
applicable as regulatory and supervisory standards change.
Additionally, actions subject to this prohibition would include
feedback that is oral, a condition attached to an approval, the
introduction of new approval requirements, and any other heightened
requirements that are intended to force the institution to address
perceived reputation risk.
The term ``doing business with'' in the proposed rule is intended
to be construed broadly and to include both business relationships with
credit union members, accountholders, and with third-party service
providers. It is also intended to include the relationship of an
institution with organizations or individuals that the institution is
providing with charitable donations or services. This term is intended
to include both existing business relationships and prospective
business relations.
The term ``institution-affiliated party'' has the same meaning as
in 12 U.S.C. 1786(r).
The proposed rule would define ``reputation risk'' as the risk,
regardless of how the risk is labeled by the institution or by the
agency, 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
unrelated to the current or future financial and operational condition
of the institution. This definition is intended to include not just
risks that the agency or the institution identify as ``reputation
risks,'' but any similar risk based around concerns regarding the
public's perception of the institution beyond the scope of other risks
in the agency's supervisory frameworks. This definition is not intended
to capture risks posed by public perceptions of the institution's
current or future financial or operational condition because such
perceptions relate to risks other than reputation risk. For example,
public perceptions that an institution has insufficient liquidity and
therefore is susceptible to a run on shares would not be considered
reputation risk.
The prohibitions of the proposed rule would apply to actions taken
on the basis of reputation risk; political, social, cultural, or
religious views and beliefs; constitutionally protected speech; or
based on bias against politically disfavored but lawful business
activities perceived to present reputation risk. The proposed rule
would not prohibit criticism, supervisory feedback, or other actions to
address traditional risk channels related to safety and soundness and
compliance with applicable laws, including credit risk, interest rate
risk, and transaction risk (including cybersecurity, information
security, and illicit finance), provided that such criticism,
supervisory feedback, or other actions addressing these other risks is
not a pretext by examiners aimed at reputation risk.
Under the proposed rule, the NCUA would make one conforming
amendment to the NCUA's regulations to eliminate references to
reputation risk. The conforming amendment would be made in the stress
testing requirements for complex credit unions.\13\ One other NCUA
regulation codified in 12 CFR part 717 refers to reputation risk
concerning certain identity theft prevention programs required by the
Fair and Accurate Credit Transactions Act of 2003.\14\ However, by
statute, guidelines and regulations for these programs must occur
jointly across certain federal agencies,\15\ so no conforming amendment
is suggested for 12 CFR part 717 at this time. The NCUA will consider
making changes to 12 CFR part 717 in a separate, joint rulemaking in
the future. Until that separate, joint rulemaking occurs, the NCUA
expects to exercise its discretion in enforcing 12 CFR part 717 by
using agency resources to assess compliance without regard to
reputation risk.
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\13\ 12 CFR 702.304(b)(2) requires a complex credit union to
consider how it will maintain stress test capital commensurate with
its risks, including reputational risk.
\14\ Public Law 108-159, 117 Stat. 1952 (codified at 15 U.S.C.
1681-1681x); 12 CFR 717.90(b)(3)(ii) defines a covered account as
any other account that the federal credit union offers or maintains
for which there is a reasonably foreseeable risk to members or to
the safety and soundness of the federal credit union from identity
theft, including financial, operational, compliance, reputation, or
litigation risks.
\15\ See 15 U.S.C. 1681m(e); 72 FR 63720 (Nov. 9, 2007)
(discussing the definition that refers to reputation risk and
linking it to 15 U.S.C. 1681m(e)).
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[[Page 48412]]
III. Request for Comments
The agency seeks comment on all aspects of the proposed rule,
including the following:
1. Do commenters believe the prohibitions capture the types of
actions that add undue subjectivity to supervision based on reputation
risk? If there are other prohibitions that would be warranted, please
identify such prohibitions and explain.
2. Is the definition of ``adverse action'' in the proposed rule
sufficiently clear? Should the definition be broader or narrower? Are
there other types of agency actions that should be included in the list
of ``adverse actions?'' Does the catch-all provision at the end of the
definition of ``adverse action'' appropriately capture any agency
action that is intended to punish or discourage credit unions on the
basis of perceived reputation risk? Is such catch-all provision
sufficiently clear?
3. Are commenters aware of any other uses of reputation risk in
supervision that should be addressed in this proposed rule? If so,
please describe such uses and their effects on credit unions.
4. Do commenters believe the definition of ``reputation risk''
should be broadened or narrowed? If so, how should the definition be
broadened or narrowed? Please provide support for any suggested
changes.
5. The proposed definition of ``reputation risk'' includes risks
that could negatively impact public perception of a credit union for
reasons unrelated to the credit union's financial condition. Should
this be broadened to include reasons unrelated to the credit union's
operational condition?
6. Should the list of relationships that would constitute ``doing
business with'' include additional types of relationships?
7. Does the removal of reputation risk create any other unintended
consequences for the agency or institutions?
8. Would the proposed rule have any costs, benefits, or other
effects that the agency has not identified? If so, please describe any
such costs, benefits, or other effects.
9. Should the definition of institution be broadened or are there
any other categories of activities that should be excluded from the
scope of the rule?
IV. Expected Effects
A. Background
As previously discussed, to improve the efficiency and
effectiveness of the supervisory framework, the NCUA is proposing to
establish a regulation codifying the removal of reputation risk from
its examination and supervision programs.
B. Parties Affected by the Proposal
1. NCUA Regulated Entities Affected by the Rule
The NCUA currently supervises 2,740 FCUs and 1,630 federally
insured, state-chartered credit unions (collectively referred to as
FICUs).\16\ Because all FICUs were subject to reputation risk
assessments, the proposed rule would affect all 4,370 institutions.
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\16\ Based on data accessed using FINDRS on August 1, 2025.
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2. Other Parties
Because the proposed rule aims to remove the influence of the
agency's reputation risk assessments on institutions' member and
business relationships, NCUA concludes that the proposed rule could
potentially affect all FICUs' current and future members and business
partners. It would also affect any other institutions over which the
NCUA has or may be granted supervisory authority.
C. Current Legal and Regulatory Baselines
On September 25, 2025, the NCUA issued Letter to Credit Unions 25-
CU-05 wherein the agency notified supervised institutions that it was
ceasing to use reputation risk in the examination and supervisory
process. The NCUA also sent a memo to staff on that same day,
instructing staff that they may no longer base supervisory concerns on
reputation risk. NCUA employees were notified that they may not refer
to or engage in discussions about reputation risk or similar concepts
as part of examinations and supervision contacts or other regulatory or
supervisory actions (such as waivers, application decisions, or
enforcement actions) for a credit union or credit union service
organization. The agency is in the process of removing reputation risk
from its regulations, policies, manuals, and training materials.
Therefore, the NCUA has already discontinued reputation risk-based
supervision as of September 25, 2025. The proposed rule would create a
formal, legal mandate to remove reputation risk from NCUA's supervision
framework. Effectively, there would be no additional burden, and
therefore no compliance costs since reputation risk will not be
examined for effective September 25, 2025.
D. Costs and Benefits
Implementing a regulation to prohibit the use of reputation risk in
the examination and supervision program will remove uncertainty and the
potential for misuse, which inherently will provide benefits to FICUs.
The removal of reputation risk will ensure greater consistency and
objectivity of supervisory decisions, increasing the predictability for
regulated institutions to understand and manage regulators' supervisory
expectations. The proposed rule should benefit credit unions and their
members by formally eliminating actual or perceived reputation risk-
related regulatory restrictions and constraints on member services that
would otherwise be permissible.
Other than the inherent benefits described above, the NCUA cannot
quantify the number of institutions, or the associated costs, where an
institution was criticized for activities because of reputation risk.
Nor does the NCUA have the information necessary to quantify the number
of institutions that might make changes to their operations based on
this change.
V. Regulatory Procedures
A. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 (5
U.S.C. 553(b)(4)) (Act) requires that a notice of proposed rulemaking
include the internet address of a summary of not more than 100 words in
length of a proposed rule, in plain language, that shall be posted on
the internet website under section 206(d) of the E-Government Act of
2002 (44 U.S.C. 3501 note) (commonly known as <a href="http://regulations.gov">regulations.gov</a>).
In summary, the proposed rule would prohibit the agency from
criticizing or taking adverse action against an institution on the
basis of reputation risk. The proposed rule would also prohibit the
agency from requiring, instructing, or encouraging an institution to
close an account, to refrain from providing an account, product, or
service, or to modify or terminate any product or service on the basis
of a person or entity's political, social, cultural, or religious views
or beliefs, constitutionally protected speech, or on the basis of
politically disfavored but lawful business activities perceived to
present reputation risk.
The proposal and the required summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
[[Page 48413]]
B. Executive Orders 12866, 13563, and 14192
Pursuant to Executive Order 12866 (``Regulatory Planning and
Review''), a determination must be made whether a regulatory action is
significant and therefore subject to review by the Office of Management
and Budget (OMB) in accordance with the requirements of the Executive
Order.\17\ Executive Order 13563 (``Improving Regulation and Regulatory
Review'') supplements and reaffirms the principles, structures, and
definitions governing contemporary regulatory review established in
Executive Order 12866.\18\ This proposed rule was drafted and reviewed
in accordance with Executive Order 12866 and Executive Order 13563. OMB
has determined that this proposed rule is a ``significant regulatory
action'' as defined in section 3(f)(1) of Executive Order 12866
Executive Order 14192 (``Unleashing Prosperity Through Deregulation'')
requires that any new incremental costs associated with new regulations
shall, to the extent permitted by law, be offset by the elimination of
existing costs associated with at least 10 prior regulations.\19\ This
proposed rule, if finalized as proposed, is not expected to be an
Executive Order 14192 regulatory action.
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\17\ 58 FR 51735 (Oct. 4, 1993).
\18\ 76 FR 3821 (Jan. 21, 2011).
\19\ 90 FR 9065 (Feb. 6, 2025).
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C. Regulatory Flexibility Act
The Regulatory Flexibility Act \20\ generally requires an agency to
conduct a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements, unless the agency certifies that
the rule will not have a significant economic impact on a substantial
number of small entities. If the agency makes such a certification, it
shall publish the certification at the time of publication of either
the proposed rule or the final rule, along with a statement providing
the factual basis for such certification.\21\ For purposes of this
analysis, the NCUA considers small credit unions to be those having
under $100 million in assets.\22\ The Board fully considered the
potential economic impacts of the regulatory amendments on small credit
unions.
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\20\ 5 U.S.C. 601 et seq.
\21\ 5 U.S.C. 605(b).
\22\ 80 FR 57512 (Sept. 24, 2015).
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The NCUA ceased using reputation risk in its supervisory framework
effective September 25, 2025, and a review of examination data shows
that reputation risk was not frequently used to support corrective
actions in reports of examination. As such, this rule will not have a
significant economic impact on FICUs in general.
Accordingly, the NCUA certifies the proposed rule would not have a
significant economic impact on a substantial number of small credit
unions.
D. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemaking in
which an agency creates a new or amends existing information collection
requirements.\23\ For purposes of the PRA, an information collection
requirement may take the form of a reporting, recordkeeping, or a
third-party disclosure requirement. The NCUA may not conduct or
sponsor, and the respondent is not required to respond to, an
information collection unless it displays a valid OMB control number.
The NCUA has reviewed this proposed rule and determined that it does
not create any information collection or revise any existing collection
of information. Accordingly, no PRA submissions to OMB will be made
with respect to this proposed rule. The NCUA nevertheless invites
comments on any PRA implications.
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\23\ 44 U.S.C. 3501-3520; 5 CFR part 1320.
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E. Executive Order 13132 on Federalism
Executive Order 13132 encourages regulatory agencies to consider
the impact of their actions on state and local interests. The NCUA, a
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order to adhere to fundamental federalism
principles. The proposed rule would affect how NCUA examiners cite or
use certain risks in the supervisory process, including for federally
insured, state-chartered credit unions. But the proposed rule would not
constrain how state regulators apply these same concepts or otherwise
change the relationship between NCUA and the state regulators. The
rulemaking would therefore not have direct effect on the states, the
relationship between the national government and the states, or on the
distribution of power and responsibilities among the various levels of
government.
F. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this proposed rule would not affect
family well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999.\24\ While the proposed
changes in NCUA's supervision of institutions could expand access to
services, the effect would be indirect and not easily quantifiable.
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\24\ Public Law 105-277, 112 Stat. 2681 (1998).
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List of Subjects
12 CFR Part 702
Banks, banking, credit unions, reporting and recordkeeping
requirements.
12 CFR Part 791
Administrative practice and procedure, credit unions, Sunshine Act.
By the National Credit Union Administration Board, this 17th day
of October 2025.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons stated in the preamble, the NCUA Board proposes to
amend 12 CFR parts 702 and 791 as follows:
PART 702--CAPITAL ADEQUACY
0
1. The authority citation for part 702 continues to read as follows:
Authority: 12 U.S.C. 1757(9), 1766(a), 1784(a), 1786(e), 1790d.
0
2. In Sec. 702.304(b)(2), remove ``reputational,''.
PART 791--RULES OF NCUA BOARD PROCEDURE; PROMULGATION OF NCUA RULES
AND REGULATIONS; PUBLIC OBSERVATION OF NCUA BOARD MEETINGS; USE OF
SUPERVISORY GUIDANCE; PROHIBITON ON USE OF REPUTATION RISK
0
3. The authority citation for part 791 continues to read as follows:
Authority: 12 U.S.C. 1766, 1781, 1786, 1787, and 5 U.S.C. 552b.
0
4. The heading for part 791 is revised to read as set forth above.
0
5. Revise the table of contents for part 791 as follows:
Subpart A--Rules of NCUA Board Procedure
791.1 Scope
791.2 Number of votes required for board action.
791.3 Voting by proxy.
791.4 Methods of acting.
791.5 Scheduling of board meetings.
791.6 Subject matter of a meeting.
Subpart B--Promulgation of NCUA Rules and Regulations
791.7 Scope.
791.8 Promulgation of NCUA rules and regulations.
Subpart C--Public Observation of NCUA Board Meetings Under the Sunshine
Act
791.9 Scope.
[[Page 48414]]
791.10 Definitions.
791.11 Open meetings.
791.12 Exemptions.
791.13 Public announcement of meetings.
791.14 Regular procedure for closing meeting discussions or limiting
the disclosure of information.
791.15 Requests for open meeting.
791.16 General counsel certification.
791.17 Maintenance of meeting records.
791.18 Public availability of meeting records and other documents.
Subpart D--Use of Supervisory Guidance
791.19 Purpose.
791.20 Implementation of Interagency Statement.
791.21 Rule of Construction.
Appendix A to Subpart D
Statement Clarifying the Role of Supervisory Guidance
Subpart E--Prohibition on Use of Reputation Risk by NCUA
791.22 Prohibitions.
0
6. Add subpart E to read as follows:
Subpart E--Prohibition on Use of Reputation Risk by NCUA
Sec. 791.22 Prohibitions.
(a) The NCUA will not criticize, formally or informally, or take
adverse action against an institution on the basis of reputation risk.
(b) The NCUA will not require, instruct, or encourage an
institution, or any employee of an institution, to:
(1) refrain from contracting or doing business with a third party,
including an institution-affiliated party, on the basis of reputation
risk;
(2) terminate a contract or discontinue doing business with a third
party, including an institution-affiliated party, on the basis of
reputation risk;
(3) sign a contract or initiate doing business with a third party,
including an institution-affiliated party, on the basis of reputation
risk; or
(4) modify the terms or conditions under which it contracts or does
business with a third party, including an institution-affiliated party,
on the basis of reputation risk.
(c) The NCUA will not require, instruct, or encourage an
institution, or any employee of an institution, to terminate a contract
with, discontinue doing business with, sign a contract with, initiate
doing business with, modify the terms under which it will do business
with a person or entity, or take any action or refrain from taking any
action on the basis of the person's or entity's political, social,
cultural, or religious views or beliefs, constitutionally protected
speech, or on the basis of the person or entity's involvement in
politically disfavored but lawful business activities based on
reputation risk.
(d) The prohibitions in paragraphs (a) through (c) apply only to
actions taken on the bases described in paragraphs (a) through (c), and
the prohibition in paragraph (c) shall not apply with respect to
persons, entities, or jurisdictions sanctioned by the Office of Foreign
Assets Control.
(e) The prohibitions in paragraphs (a) through (c) apply only to
actions taken on the bases described in paragraphs (a) through (c), and
the prohibition in paragraph (c) shall not apply with respect to
actions taken to comply with statutory or regulatory field of
membership requirements, administration of Community Development
Revolving Loan Fund activities, or any other application or decision
where federal law mandates the NCUA to consider criteria such as
character and fitness or integrity.
(f) Nothing in this section shall restrict the NCUA's authority to
implement, administer, and enforce the provisions of subchapter II of
chapter 53 of title 31, United States Code.
(g) The NCUA will not take any supervisory action or other adverse
action against an institution, a group of institutions, or the
institution-affiliated parties of any institution that is designed to
punish, discourage, or encourage an individual or group from engaging
in any lawful political, social, cultural, or religious activities or
lawful business activities, constitutionally protected speech, or, for
political reasons, lawful business activities that the supervisor
disagrees with or disfavors.
(h) Definitions.
(1) ``Adverse action'' includes:
(A) any negative feedback delivered by or on behalf of the NCUA to
an institution, including in an NCUA-issued report of examination or a
formal or informal enforcement action;
(B) a downgrade, or contribution to a downgrade, of any supervisory
rating, including, but not limited to:
(i) any NCUA rating under the CAMELS ratings system;
(ii) any NCUA rating under any other rating system;
(C) a denial of a filing under any of the NCUA's regulations;
(D) inclusion of a condition on a share insurance application or
other approval;
(E) imposition of additional approval requirements;
(F) any other heightened requirements on an activity or change;
(G) any reclassification of a well-capitalized federally insured
credit union or imposition of a discretionary supervisory action under
NCUA's prompt corrective action rules (12 CFR 702); and
(H) any action that negatively impacts the institution, or an
institution-affiliated party, or treats the institution differently
than similarly situated peers.
(2) ``Doing business with'' means an institution:
(A) providing any product or service, including account services;
(B) contracting with a third party for the third party to provide a
product or service;
(C) providing discounted or free products or services to customers
or third parties, including charitable activities;
(D) entering into, maintaining, modifying, or terminating an
employment relationship; or
(E) any other similar business activity that involves an
institution's member or accountholder or a third party.
(3) ``Institution-affiliated party'' means the same as in section
206 of the Federal Credit Union Act (12 U.S.C. 1786(r)).
(4) ``Institution'' means an entity for which the NCUA makes or
will make supervisory determinations or other decisions, either solely
or jointly.
(4) ``Reputation risk'' means any risk, regardless of how the risk
is labeled by the institution or the NCUA, 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 unrelated to the current or future
financial condition of the institution.
[FR Doc. 2025-19623 Filed 10-20-25; 8:45 am]
BILLING CODE 7535-01-P
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</html>Indexed from Federal Register on October 21, 2025.
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