Regulatory Alerts2026-02-26 | 2026-03818Prohibition on Use of Reputation Risk or Other Supervisory Tools To Encourage or Compel Banking Organizations To Engage in Politicized or Unlawful Discrimination
The Board of Governors of the Federal Reserve System proposes a rule to codify the removal of reputation risk from its supervisory programs and prohibit examiners from using it to encourage or compel banking organizations to deny services based on political or religious beliefs. The proposal explicitly bars the Board from influencing institutions to condition or deny banking products due to constitutionally protected speech, associations, or lawful business activities perceived to present reputation risk. By focusing supervision on core financial risks like credit and operational risk, the Board aims to increase supervisory clarity, reduce regulatory burden, and ensure that lending decisions remain with the banking organizations acting in accordance with applicable law.