Proposed Rule2026-03818
Prohibition on Use of Reputation Risk or Other Supervisory Tools To Encourage or Compel Banking Organizations To Engage in Politicized or Unlawful Discrimination
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Published
February 26, 2026
Issuing agencies
Federal Reserve System
Abstract
The Board of Governors of the Federal Reserve System (Board) is inviting public comment on a notice of proposed rulemaking (proposal or proposed rule) that would codify the removal of reputation risk from the Board's supervisory programs. The proposal would prohibit the Board from encouraging or compelling Board-supervised banking organizations to deny or condition the provision of banking or other financial products or services to an individual or business based on their constitutionally protected political or religious beliefs, associations, speech, or conduct, or based on involvement by the individual or business in politically disfavored but lawful business activities perceived to present reputation risk.
Full Text
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<title>Federal Register, Volume 91 Issue 38 (Thursday, February 26, 2026)</title>
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[Federal Register Volume 91, Number 38 (Thursday, February 26, 2026)]
[Proposed Rules]
[Pages 9499-9504]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-03818]
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FEDERAL RESERVE SYSTEM
12 CFR Part 262
[Docket No. R-1884]
RIN 7100-AH17
Prohibition on Use of Reputation Risk or Other Supervisory Tools
To Encourage or Compel Banking Organizations To Engage in Politicized
or Unlawful Discrimination
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is inviting public comment on a notice of proposed rulemaking (proposal
or proposed rule) that would codify the removal of reputation risk from
the Board's supervisory programs. The proposal would prohibit the Board
from encouraging or compelling Board-supervised banking organizations
to deny or condition the provision of banking or other financial
products or services to an individual or business based on their
constitutionally protected political or religious beliefs,
associations, speech, or conduct, or based on involvement by the
individual or business in politically disfavored but lawful business
activities perceived to present reputation risk.
DATES: Comments must be received on or before April 27, 2026.
ADDRESSES: You may submit comments, identified by Docket No. R-1884 and
RIN 7100-AH17, by any of the following methods:
<bullet> Agency Website: <a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a>. Follow the instructionsfor submitting comments, including
attachments. Preferred Method.
<bullet> Mail: Benjamin W. McDonough, Deputy Secretary, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue NW, Washington, DC 20551.
<bullet> Hand Delivery/Courier: Same as mailing address.
<bullet> Other Means: <a href="/cdn-cgi/l/email-protection#a5d5d0c7c9ccc6c6cac8c8c0cbd1d6e5c3d7c78bc2cad3"><span class="__cf_email__" data-cfemail="65151007090c06060a0808000b1116250317074b020a13">[email protected]</span></a>. You must include the
docket number in thesubject line of the message.
Comments received are subject to public disclosure. In general,
comments received will be made available on the Board's website at
<a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a> without change and will
not be modified to remove personal or business information including
confidential, contact, or other identifying information. Comments
should not include any information such as confidential information
that would not be appropriate for public disclosure. Public comments
may also be viewed electronically or in person in Room M-4365A, 2001 C
St. NW, Washington, DC 20551, between 9 a.m. and 5 p.m. during Federal
business weekdays.
FOR FURTHER INFORMATION CONTACT: Anna Lee Hewko, Associate Director,
(202) 530-6260; Mehdi Beyhaghi, Principal Economist, (202) 941-8706;
Devyn Jeffereis, Lead Financial Institution Policy Analyst, (202) 452-
2729, Division of Supervision and Regulation; or Asad Kudiya, Associate
General Counsel, (202) 475-6358; Alyssa O'Connor, Senior Counsel, (202)
577-5476; Harley Moyer, Attorney, (240) 749-9069, Legal Division, Board
of Governors of the Federal Reserve System, 20th and C Streets NW,
Washington, DC 20551. For the hearing impaired only, Telecommunication
Device for the Deaf (TDD), (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction and Objectives of the Proposal
II. Overview of the Proposal
III. Request for Comment
IV. Economic Analysis
A. Baseline
B. Economic Benefits and Costs
V. Administrative Law Matters
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Plain Language
D. Riegle Community Development and Regulatory Improvement Act
of 1994
E. Providing Accountability Through Transparency Act of 2023
I. Introduction and Objectives of the Proposal
It is the Board's policy not to encourage or compel Board-
supervised banking organizations to deny or condition the provision of
banking or other financial products or services to an individual or
business based on their constitutionally protected political or
religious beliefs, associations, speech, or conduct, or based on
involvement by the individual or business in politically disfavored but
lawful business activities perceived to present reputation risk. The
decision regarding whether or not to make a loan or to open, close, or
maintain an account, provide any other financial product or service, or
modify the terms of any financial product or service rests with the
banking organization, acting in accordance with applicable law.
In addition to the Board's policy, the Board announced in June 2025
that reputation risk will no longer be a component of examination
programs in its supervision of banks, and that the Board will train
examiners to help ensure this change is implemented consistently across
Board-supervised banking organizations.\1\ The Board is eliminating
references to reputation and reputation risk in its supervisory
materials, including examination manuals.\2\ The Federal Deposit
Insurance Corporation (FDIC), the Office of the Comptroller of the
Currency (OCC), and the National Credit Union Administration (NCUA)
also have announced their intention to eliminate references to
reputation risk in their examination manuals and other supervisory
materials.\3\ These agencies recently requested comment on proposals to
codify the removal of reputation risk from their supervisory
programs.\4\
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\1\ Board, Press Release (June 23, 2025), <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250623a.htm">https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250623a.htm</a>.
\2\ Id.
\3\ See FDIC, Press Release (October 7, 2025), <a href="https://www.fdic.gov/news/financial-institution-letters/2025/agencies-issue-proposal-prohibit-use-reputation-risk">https://www.fdic.gov/news/financial-institution-letters/2025/agencies-issue-proposal-prohibit-use-reputation-risk</a>; OCC, News Release 2025-21
(March 20, 2025), <a href="https://www.occ.gov/news-issuances/news-releases/2025/nr-occ-2025-21.html">https://www.occ.gov/news-issuances/news-releases/2025/nr-occ-2025-21.html</a> and OCC Bulletin 2025-4 (March 20, 2025),
<a href="https://www.occ.gov/news-issuances/bulletins/2025/bulletin-2025-4.html">https://www.occ.gov/news-issuances/bulletins/2025/bulletin-2025-4.html</a>; NCUA, Press Release (September 25, 2025), <a href="https://ncua.gov/newsroom/press-release/2025/ncua-eliminates-use-reputational-risk">https://ncua.gov/newsroom/press-release/2025/ncua-eliminates-use-reputational-risk</a>.
\4\ 90 FR 48825 (October 30, 2025); 90 FR 48409 (October 21,
2025).
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The Board has defined reputation risk as ``the potential that
negative publicity regarding an institution's business practices,
whether true or not, will cause a decline in the customer base, costly
litigation, or revenue reductions.'' \5\ Reputation risk increased in
prevalence as a supervisory concept in the 1990s and thereafter; the
concept generally was not used in the Board's
[[Page 9500]]
supervisory programs before that time.\6\ In 1995, the Board published
guidance that established guidelines for the rating of risk management
at state member banks and bank holding companies.\7\ The guidelines
listed six risk channels, one of which was reputation risk.\8\ In
subsequent years, reputation risk was included in other supervisory
materials. For example, in the case of the Board, this included
guidance related to risk-focused safety and soundness examinations and
inspections and consumer compliance risk in bank holding companies.\9\
Over time, concerns have arisen that reputation risk and other similar
supervisory tools have been misused. A recent Executive Order raised
concerns regarding debanking based on political or religious beliefs or
lawful business activities.\10\
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\5\ Attachment B to SR Letter 95-51, ``Rating the Adequacy of
Risk Management Processes and Internal Controls at State Member
Banks and Bank Holding Companies'' (November 14, 1995) (SR 95-51).
In connection with the Board's June 23, 2025, press release, this
attachment was revised to remove the reference to reputation risk.
\6\ The concept of reputation risk as a potential threat to
banking organizations and other financial institutions predates the
1990s, however. See I. Walter, ``Reputational Risk in Large
International Banks,'' working paper based on a presentation at the
Federal Reserve Bank of Chicago, Eighteenth Annual International
Banking Conference: The Future of Large, Internationally Active
Banks (2015); see also J. Hill, Regulating Bank Reputation Risk, 54
Ga. L. Rev. 523 (2019).
\7\ See Attachment B to SR 95-51.
\8\ Id.
\9\ See SR Letter 96-14, ``Risk-focused Safety and Soundness
Examinations and Inspections'' (May 24, 1996); SR Letter 03-22/CA
Letter 03-15, ``Framework for Assessing Consumer Compliance Risk at
Bank Holding Companies'' (December 23, 2003). These letters have
since been revised to remove references to reputation risk.
\10\ E.O. 14331, 90 FR 38925 (August 12, 2025).
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The Board is empowered to conduct supervision of various types of
banking organizations.\11\ It is also empowered to make rules ``to
enable it to administer and carry out'' its supervisory programs.\12\
Pursuant to such authority, the Board is proposing to codify the
removal of reputation risk from the Board's supervisory programs and to
prohibit the Board from encouraging or compelling Board-supervised
banking organizations to deny or condition the provision of banking or
other financial products or services to an individual or business based
on their constitutionally protected political or religious beliefs,
associations, speech, or conduct, or based on involvement by the
individual or business in politically disfavored but lawful business
activities perceived to present reputation risk.
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\11\ See, e.g., 12 U.S.C. 248(a), 325, 326, 483, 602, 625,
1467a(b)(2)(A), (4)(A), 1820(d), 1844(c)(1)(A), (2)(A),
3105(c)(1)(A), (2), 3106(a), 5365(b)(2).
\12\ 12 U.S.C. 1844(b). See also 12 U.S.C. 248(i), 611a,
1467a(g)(1), 3108(a).
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The proposal aims to achieve several objectives. First, by
establishing a binding regulation, the Board would further ensure that
the actions and decisions of supervisory staff are not based on
reputation risk and align with the Board's broader policy. Furthermore,
the proposal would reflect experience that reputation risk can be
difficult to quantify and communicate, making it challenging for firms
to remedy identified concerns. Therefore, this proposal would increase
supervisory clarity through the codification of the removal of
reputation risk and would facilitate greater precision in supervisory
decision making. It also would support the Board's supervisory focus on
core financial risks. Procedurally, issuing this proposal for notice
and comment allows external stakeholders to provide their views on this
issue.
The proposal would not inhibit the efficacy of the Board's
supervision and regulation function moving forward. Safety and
soundness concerns that motivated the Board's prior inclusion of
reputation risk in supervision are adequately addressed through other
existing risk types. The Board continues to supervise banking
organizations' management of these other risk channels, such as credit
risk, market risk, liquidity risk, operational risk, and legal
risk,\13\ with an emphasis on core, material financial risks.
Additionally, the proposal would not alter the Board's expectation that
Board-supervised banking organizations maintain strong risk management
to promote safety and soundness and compliance with applicable laws and
regulations.\14\
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\13\ See, e.g., Attachment B to SR 95-51.
\14\ See, e.g., id.
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Furthermore, the proposal is not intended to impact the ability of
banking organizations to manage their businesses and make independent
decisions regarding their customers. The decision regarding whether or
not to make a loan or to open, close, or maintain an account, provide
any other financial product or service, or modify the terms of any
financial product or service rests with the banking organization,
acting in accordance with applicable law.
II. Overview of the Proposal
This proposal would codify the removal of reputation risk from the
Board's supervisory programs. The proposal also would explicitly
prohibit the Board from encouraging or compelling Board-supervised
banking organizations to deny or condition the provision of banking or
other financial products or services to an individual or business based
on their constitutionally protected political or religious beliefs,
associations, speech, or conduct, or based on involvement by the
individual or business in politically disfavored but lawful business
activities perceived to present reputation risk.
The definition of ``banking organization,'' for purposes of the
proposal, would be a bank holding company, as it is defined at 12 CFR
225.2(c); a savings and loan holding company, as it is defined at 12
CFR 238.2(m); a state member bank, as it is defined at 12 CFR 208.2(g);
and the combined U.S. operations of a foreign banking organization, as
it is defined at 12 CFR 252.2 and 12 CFR 211.21(o). The combined U.S.
operations of a foreign banking organization include the U.S. branches
and agencies of the foreign banking organization and all U.S.
subsidiaries of the foreign banking organization (such as a U.S.
intermediate holding company). ``Banking organization'' would also
include the direct and indirect subsidiaries of a bank holding company,
savings and loan holding company, and state member bank.
The proposed rule would state that the Board shall not use
reputation risk as a component of its examination programs or in
materials used for the supervision of banking organizations. Materials
used for the supervision of banking organizations include examination
manuals, guidance documents, and examiner training materials. The
definition of ``reputation risk'' would be the potential that negative
publicity regarding a banking organization's business practices,
whether true or not, will cause a decline in the banking organization's
customer base, costly litigation, or revenue reductions, which is the
definition previously used by the Board in SR 95-51.
The proposal would also include a general statement of the Board's
policy. Specifically, it would state that the Board shall not encourage
or compel banking organizations to deny or condition the provision of
banking or other financial products or services to an individual or
business based on their constitutionally protected political or
religious beliefs, associations, speech, or conduct, or based on
involvement by the individual or business in politically disfavored but
lawful business activities perceived to present reputation risk.
Additionally, the statement would indicate that the decision regarding
whether or not to make a loan or to open, close, or maintain an
account, provide any other financial product or service, or modify the
terms of any financial product or service rests with the banking
organization, acting in accordance with applicable law. The
[[Page 9501]]
proposal would not prohibit criticism, supervisory feedback, or other
actions to address other risk channels related to safety and soundness
or compliance with applicable laws and regulations.
Finally, the proposal would make clear that the Board's authority
to implement, administer, and enforce the provisions of applicable law
would not be restricted. Applicable law would include, but not be
limited to, the Bank Secrecy Act; sanctions programs administered by
the Office of Foreign Assets Control; the Federal Reserve Act; the Bank
Holding Company Act of 1956; the Home Owners' Loan Act; the Change in
Bank Control Act; the International Banking Act of 1978; the Bank
Merger Act; the International Lending Supervision Act of 1983; the
Federal Deposit Insurance Act; the Equal Credit Opportunity Act; and
the Fair Housing Act. The proposed rule would state that the Board
would implement, administer, and enforce applicable law consistent with
the proposal.
If finalized, the Board would provide training on all aspects of
this proposal for supervisory staff to ensure compliance with the
proposal. Consistent with standard practice, the Board also would
ensure that there are internal management controls to oversee
compliance with the proposal.
III. Request for Comment
Question 1: What other references to reputation risk in the Board's
regulations or its supervisory programs should be addressed by the
proposal? How should the Board address those references?
Question 2: Is the proposal's definition of ``reputation risk''
appropriate; why or why not? What are the advantages and disadvantages
of the definition? How should the definition be broadened or narrowed?
What different definition of reputation risk should the Board consider?
Question 3: What changes to the proposal's definition of ``banking
organization'' should the Board consider? Should the Board consider
including additional or fewer categories of entities? For example, the
Board intends to include ``permitted payment stablecoin issuers,'' as
defined in 12 U.S.C. 5901(23), as a banking organization after the
Board completes rulemakings required under 12 U.S.C. 5901 et seq. What
are other considerations the Board should consider regarding permitted
payment stablecoin issuers in the context of the rulemakings required
under 12 U.S.C. 5901 et seq.?
Question 4: Is the proposal's regulatory text that would codify a
prohibition on the use of reputation risk clear; why or why not? How
could ``examination programs'' or ``materials used for the supervision
of banking organizations'' be defined further?
Question 5: What, if any, additional provisions of applicable law
should the proposal's rule of construction include in its list? Which,
if any, provisions of applicable law should be removed? Why would any
such addition or removal be appropriate?
Question 6: What, if any, unintended consequences for the Board or
Board-supervised banking organizations may result from the proposal,
including codifying the removal of reputation risk from the Board's
supervisory programs and materials?
Question 7: What, if any, alternatives are there to the proposal
that would better achieve the Board's objectives?
Question 8: What, if any, references to concepts related to
reputation risk should the Board consider revising in its supervisory
materials or regulations?
Question 9: Please describe any costs, benefits, or other effects
of the proposal that the Board has not identified.
IV. Economic Analysis
A. Baseline
The Federal Reserve supervises bank holding companies, savings and
loan holding companies, state member banks, and foreign banking
organizations (FBOs) operating in the United States. These entities
vary in asset size and complexity.\15\ The previous supervisory
framework incorporated reputation risk as one component of a broader
risk-assessment framework applied across these entities.
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\15\ For an overview of Federal Reserve supervised organizations
by portfolio, including the number of institutions and total assets
in each portfolio, see Board, Supervision and Regulation Report at
19 (December 2025) (Table 2), <a href="https://www.federalreserve.gov/publications/files/202512-supervision-and-regulation-report.pdf">https://www.federalreserve.gov/publications/files/202512-supervision-and-regulation-report.pdf</a>.
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As previously mentioned, the Board announced in June 2025 that
reputation risk will no longer be a component of examination programs
in its supervision of banks. Since then, the Board has not used
reputation risk in its examination programs, and reputation risk is
being removed from supervisory materials. As a result, the proposal's
benefits and costs since June 2025 are expected to be de minimis, as
there has been no further change in policy since that time. The
analysis below evaluates the benefits and costs of the proposed rule if
the Board had not announced the removal of reputation risk from the
Board's supervisory programs in June 2025. Since the June 2025
announcement, some of these benefits and costs may have been realized.
Prior to the Board's June 2025 announcement, the word
``reputation'' had appeared in a portion of total Matters Requiring
Attention (MRAs) and Matters Requiring Immediate Attention (MRIAs)
issued by the Federal Reserve System. When broken down by institution
type, the word ``reputation'' was mentioned in approximately 4.6
percent of MRAs/MRIAs for bank holding companies and savings and loan
holding companies, 1.5 percent for state member banks, and 2.5 percent
for FBOs operating in the United States over the past ten years. To
assess historical impacts, the Board conducted an analysis using
confidential examination data from a ten-year period through March
2025. The Board identified prior instances by searching MRAs and MRIAs
for the word ``reputation,'' then calculated the percentage of
examinations containing at least one such supervisory finding for each
year. The Board then summed each yearly percentage for each institution
type, which resulted in a total percentage over the ten-year period.
These percentages include MRAs and MRIAs in which reputation risk was
only one of multiple risk concepts or supervisory issues raised. This
historical data helps to demonstrate the extent to which reputation
risk considerations may have influenced supervisory outcomes under the
previous framework.
B. Economic Benefits and Costs
The prohibition on using reputation risk in supervision is expected
to generate several economic benefits. First, Board-supervised banking
organizations would likely experience reduced regulatory burden through
streamlined supervisory processes. This effect becomes particularly
significant when considering the cumulative impact across the portfolio
of Board-supervised banking organizations. The proposal would have
notable effects on small institutions. These institutions would likely
experience proportionally greater benefits from reduced compliance
burden, as smaller institutions typically face higher relative
regulatory compliance costs.
Second, the proposal would increase clarity and objectivity in the
supervisory process by focusing examinations on other risk categories,
such as credit, market, liquidity, and operational risk. These risk
categories are objective measures that result in greater consistency in
the supervisory process. This consistency would benefit the diverse
range of Board-supervised
[[Page 9502]]
banking organizations and reduce regulatory uncertainty.
Third, removing reputation risk from supervisory considerations
could expand market access opportunities for Board-supervised banking
organizations. These entities may be able to maintain or establish
profitable relationships that may have been previously discouraged due
to reputation risk concerns. This could economically benefit affected
institutions, with a potential notable aggregate impact across the
large number of Board-supervised banking organizations.
Finally, the change would allow for more efficient resource
allocation within the Federal Reserve System's supervisory function.
Examiners could redirect examination resources toward other risk types,
enabling more effective supervision across the diverse portfolio of
institutions under Federal Reserve System oversight.
Conversely, the proposed prohibition on using reputation risk in
supervision is not without costs. Specifically, the proposal would
likely incur transitional implementation costs, including revising
examination manuals, retraining examiners, and updating supervisory
guidance. Staff resources would be required, reflecting the large
number of affected institutions. These resources would also be needed
to implement the new approach consistently for different institution
types, given the diversity in size and complexity of Board-supervised
banking organizations.
Based on the analysis of economic impacts, the Board has determined
that the benefits of the proposal are likely to outweigh the costs. The
reduced regulatory burden, enhanced supervisory clarity, potential for
expanded market opportunities, and more efficient resource allocation
provide compelling justification for the proposal. While transitional
challenges exist, including implementation costs, these are largely
short-term and can be mitigated through appropriate planning. The
benefits are expected to accrue across all Board-supervised banking
organizations, with particularly meaningful impact for smaller
institutions.
V. Administrative Law Matters
A. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (PRA),\16\
the Board may not conduct or sponsor, and a respondent is not required
to respond to, an information collection unless it displays a valid
Office of Management and Budget (OMB) control number. The Board
reviewed the proposal under the authority delegated to the Board by the
OMB and determined that it contains no collections of information under
the PRA.\17\ Accordingly, there is no paperwork burden associated with
the rule.
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\16\ 44 U.S.C. 3501 et seq.
\17\ 44 U.S.C. 3502(3).
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B. Regulatory Flexibility Act
The Board is providing an initial regulatory flexibility analysis
with respect to this proposed rule. The Regulatory Flexibility Act
(RFA) \18\ requires an agency to consider whether the rules it proposes
will have a significant economic impact on a substantial number of
small entities.\19\ In connection with a proposed rule, the RFA
requires an agency to prepare and invite public comment on an initial
regulatory flexibility analysis describing the impact of the rule on
small entities, unless the agency certifies that the proposed rule, if
promulgated, would not have a significant economic impact on a
substantial number of small entities. An initial regulatory flexibility
analysis must contain: (1) a description of the reasons why action by
the agency is being considered; (2) a succinct statement of the
objectives of, and legal basis for, the proposed rule; (3) a
description of, and, where feasible, an estimate of the number of small
entities to which the proposed rule will apply; (4) a description of
the projected reporting, recordkeeping, and other compliance
requirements of the proposed rule, including an estimate of the classes
of small entities that will be subject to the requirement and the type
of professional skills necessary for preparation of the report or
record; (5) an identification, to the extent practicable, of all
relevant Federal rules which may duplicate, overlap with, or conflict
with the proposed rule; and (6) a description of any significant
alternatives to the proposed rule which accomplish its stated
objectives and minimize any significant economic impact of the proposed
rule on small entities.\20\
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\18\ 5 U.S.C. 601 et seq.
\19\ Under regulations issued by the U.S. Small Business
Administration (SBA), a small entity includes a depository
institution, bank holding company, or savings and loan holding
company with total assets of $850 million or less. See 13 CFR
121.201. Consistent with the SBA's General Principles of
Affiliation, the Board includes the assets of all domestic and
foreign affiliates toward the applicable size threshold when
determining whether to classify a particular entity as a small
entity. See 13 CFR 121.103. As of the second quarter of 2025, there
were approximately 2,796 small bank holding companies and
approximately 157 small savings and loan holding companies, and
approximately 443 small state member banks.
\20\ 5 U.S.C. 603(b)-(c).
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The Board has considered the potential impact of the proposal on
small entities in accordance with the RFA. Based on its analysis and
for the reasons stated below, the Board believes that this proposal
will not have a significant economic impact on a substantial number of
small entities. Nevertheless, the Board is publishing and inviting
comment on this initial regulatory flexibility analysis. As discussed
in detail above, the proposal would codify the removal of reputation
risk from the Board's supervisory programs. Furthermore, the proposal
would explicitly prohibit the Board from encouraging or compelling
Board-supervised banking organizations to deny or condition the
provision of banking or other financial products or services to an
individual or business based on their constitutionally protected
political or religious beliefs, associations, speech, or conduct, or
based on involvement by the individual or business in politically
disfavored but lawful business activities perceived to present
reputation risk.
As discussed in section I of this SUPPLEMENTARY INFORMATION, the
Board is empowered to conduct supervision of various types of banking
organizations.\21\ It is also empowered to make rules ``to enable it to
administer and carry out'' its supervisory programs.\22\ Pursuant to
such authority, the Board is proposing to codify the removal of
reputation risk from the Board's supervisory programs and to prohibit
the Board from encouraging or compelling Board-supervised banking
organizations to deny or condition the provision of banking or other
financial products or services to an individual or business based on
their constitutionally protected political or religious beliefs,
associations, speech, or conduct, or based on involvement by the
individual or business in politically disfavored but lawful business
activities perceived to present reputation risk.
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\21\ See, e.g., 12 U.S.C. 248(a), 325, 326, 483, 602, 625,
1467a(b)(2)(A), (4)(A), 1820(d), 1844(c)(1)(A), (2)(A),
3105(c)(1)(A), (2), 3106(a), 5365(b)(2).
\22\ 12 U.S.C. 1844(b). See also 12 U.S.C. 248(i), 611a,
1467a(g)(1), 3108(a).
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As discussed in section IV of this SUPPLEMENTARY INFORMATION, the
Board announced in June 2025 that reputation risk will no longer be a
component of examination programs in its supervision of banks. Since
then, the Board has not used reputation risk in its examination
programs, and reputation risk is being removed from supervisory
materials. As a result, the proposal's benefits and
[[Page 9503]]
costs since June 2025 are expected to be de minimis, as there has been
no further change in policy since that time. Additionally, the proposal
would not impose mandatory requirements on any small entities, as the
proposal would only have the effect of removing reputation risk from
the Board's supervisory programs and prohibiting the Board from
encouraging or compelling Board-supervised banking organizations to
deny or condition the provision of banking or other financial products
or services to an individual or business based on their
constitutionally protected political or religious beliefs,
associations, speech, or conduct, or based on involvement by the
individual or business in politically disfavored but lawful business
activities perceived to present reputation risk.
Further, as discussed in the Paperwork Reduction Act section, the
proposal would not make changes to any projected reporting,
recordkeeping, and other compliance requirements. Therefore, there are
no reporting, recordkeeping, or other compliance requirements from this
proposal that would impose a significant cost on small entities. The
Board is aware of no other federal rules that duplicate, overlap, or
conflict with the proposal. Accordingly, the Board believes that there
are no significant alternatives to the proposal that would accomplish
the stated objectives and minimize the economic impact of the proposal
on small entities.
Therefore, the Board believes that the proposed rule will not have
a significant economic impact on a substantial number of small entities
supervised by the Board.
The Board welcomes comment on all aspects of its analysis. In
particular, the Board requests that commenters describe the nature of
any impact on small entities and provide empirical data to illustrate
and support the extent of the impact.
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act \23\ requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The Board has sought to present the
proposed rule in a simple and straightforward manner and invites
comment on the use of plain language. For example:
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\23\ Public Law 106-102, sec. 722, 113 Stat. 1338, 1471 (1999),
12 U.S.C. 4809.
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<bullet> Has the Board organized the material to suit your needs?
If not, how could the Board present the proposal more clearly?
<bullet> Are the requirements in the proposal clearly stated? If
not, how could the proposal be more clearly stated?
<bullet> Does the proposal contain technical language or jargon
that is not clear? If so, which language requires clarification?
<bullet> Would a different format (grouping and order of sections,
use of headings, paragraphing) make the proposal easier to understand?
If so, what changes to the format would achieve that?
<bullet> Is the section format adequate? If not, which of the
sections should be changed and how?
<bullet> What other changes could the Board incorporate to make the
proposal easier to understand?
D. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\24\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
insured depository institutions (IDIs), the Board must consider,
consistent with principles of safety and soundness and the public
interest, any administrative burdens that such regulations would place
on depository institutions, including small depository institutions,
and customers of depository institutions, as well as the benefits of
such regulations. In addition, section 302(b) of RCDRIA requires new
regulations and amendments to regulations that impose additional
reporting, disclosures, or other new requirements on IDIs generally to
take effect on the first day of a calendar quarter that begins on or
after the date on which the regulations are published in final form,
with certain exceptions.\25\
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\24\ 12 U.S.C. 4802(a).
\25\ 12 U.S.C. 4802(b).
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The Board notes that comment on these matters has been requested in
other sections of this SUPPLEMENTARY INFORMATION, and that the
requirements of RCDRIA will be considered as part of the overall
rulemaking process. The proposal would only impose obligations on the
Board itself; it would not directly apply to other entities. The Board
has determined that the proposed rule (1) would not impose any
additional reporting, disclosures, or other new requirements on IDIs,
and (2) places no new administrative burdens on depository
institutions, including small depository institutions, and customers of
depository institutions. Therefore, the requirements of RCDRIA do not
apply. However, the Board invites comments that will further inform its
consideration of RCDRIA.
E. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 \26\
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.\27\
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\26\ 5 U.S.C. 553(b)(4).
\27\ 44 U.S.C. 3501 note.
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In summary, the Board is proposing to codify the removal of
reputation risk from its supervisory programs. The proposal would also
prohibit the Board from encouraging or compelling Board-supervised
banking organizations to deny or condition the provision of banking or
other financial products or services to an individual or business based
on their constitutionally protected political or religious beliefs,
associations, speech, or conduct, or based on involvement by the
individual or business in politically disfavored but lawful business
activities perceived to present reputation risk.
The proposal and summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a> and <a href="https://www.federalreserve.gov/supervisionreg/reglisting.htm">https://www.federalreserve.gov/supervisionreg/reglisting.htm</a>.
List of Subjects in 12 CFR Part 262
Administrative practice and procedure, Banks, banking, Federal
Reserve System.
Authority and Issuance
For the reasons set forth in the preamble, the Board of Governors
of the Federal Reserve System proposes to amend chapter II of title 12
of the Code of Federal Regulations as follows:
PART 262--RULES OF PROCEDURE
0
1. The authority section for part 262 continues to read as follows:
Authority: 5 U.S.C. 552; 12 U.S.C. 248, 321, 325, 326, 483,
602, 611a, 625, 1467a, 1828(c), 1842, 1844, 1850a, 1867, 3105, 3106,
3108, 5361, 5368, 5467, and 5469.
0
2. Section 262.9 is added to read as follows:
[[Page 9504]]
Sec. 262.9 Prohibition on the Use of Reputation Risk or Other
Supervisory Tools to Encourage or Compel Banking Organizations to
Engage in Politicized or Unlawful Discrimination.
(a) Definitions--(1) Bank holding company has the same meaning as
in 12 CFR 225.2(c).
(2) Banking organization means a bank holding company; a savings
and loan holding company; a state member bank; any subsidiary of a bank
holding company, savings and loan holding company, and state member
bank; and the combined U.S. operations of a foreign banking
organization.
(3) Combined U.S. operations has the same meaning as in 12 CFR
252.2.
(4) Foreign banking organization has the same meaning as in 12 CFR
211.21(o).
(5) Reputation risk is the potential that negative publicity
regarding a banking organization's business practices, whether true or
not, will cause a decline in the banking organization's customer base,
costly litigation, or revenue reductions.
(6) Savings and loan holding company has the same meaning as in 12
CFR 238.2(m).
(7) State member bank has the same meaning as in 12 CFR 208.2(g).
(8) Subsidiary means any company that is owned or controlled
directly or indirectly by a bank holding company, savings and loan
holding company, state member bank, or foreign banking organization.
(b) Statement of policy. The Board shall not encourage or compel
banking organizations to deny or condition the provision of banking or
other financial products or services to an individual or business based
on their constitutionally protected political or religious beliefs,
associations, speech, or conduct, or based on involvement by the
individual or business in politically disfavored but lawful business
activities perceived to present reputation risk. The decision regarding
whether or not to make a loan or to open, close, or maintain an
account, provide any other financial product or service, or modify the
terms of any financial product or service rests with the banking
organization, acting in accordance with applicable law.
(c) Prohibition on use of reputation risk. The Board shall not use
reputation risk as a component of its examination programs or in
materials used for the supervision of banking organizations.
(d) Rule of construction. Nothing in this section shall restrict
the Board's authority to implement, administer, and enforce the
provisions of applicable law, including but not limited to the Bank
Secrecy Act; sanctions programs administered by the Office of Foreign
Assets Control; the Federal Reserve Act; the Bank Holding Company Act
of 1956; the Home Owners' Loan Act; the Change in Bank Control Act; the
International Banking Act of 1978; the Bank Merger Act; the
International Lending Supervision Act of 1983; the Federal Deposit
Insurance Act; the Equal Credit Opportunity Act; and the Fair Housing
Act. The Board shall implement, administer, and enforce applicable law
consistent with subsections (b) and (c).
By order of the Board of Governors of the Federal Reserve
System.
Benjamin W. McDonough,
Deputy Secretary of the Board.
[FR Doc. 2026-03818 Filed 2-25-26; 8:45 am]
BILLING CODE 6210-01-P
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</html>Indexed from Federal Register on February 26, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.