Federal Deposit Insurance Corporation proposes rule to bar use of reputation risk in supervision and prevent pressure to close accounts for non-financial reasons

The Federal Deposit Insurance Corporation has published a proposed rule that would prohibit the agency from using “reputation risk” as a supervisory factor, codifying its earlier decision to stop considering reputation risk as part of its supervisory program. The proposal would also bar the FDIC from requiring, instructing, or encouraging supervised institutions to close accounts or refrain from providing services based on customers’ political, social, cultural, or religious views. The FDIC frames reputation-related concerns as flowing through established safety and soundness risk channels such as credit, liquidity, and market risk, and argues that treating reputation risk as a standalone category adds no supervisory value and is vulnerable to abuse. The proposed rule would not impose new requirements or obligations on supervised institutions, and the FDIC is concurrently removing references to reputation risk from its guidance, policy documents, and examination manuals. The agency expects to continue working with other federal banking agencies to remove references to reputation risk from interagency guidance and policy documents, and it invited public comment on the proposal.