The Federal Reserve Board has requested public comment on a proposal to formally codify its earlier removal of "reputation risk" from its bank supervision framework. The proposal, announced on February 23, 2026, reiterates the Board's policy against penalizing or prohibiting a bank from serving customers engaged in legal activity.
Vice Chair for Supervision Michelle W. Bowman stated that the Fed has heard "troubling cases of debanking" where supervisors used reputation-risk concerns to pressure institutions to drop customers due to political views, religious beliefs, or involvement in lawful but disfavored businesses. Bowman emphasized that discrimination on such bases is unlawful and has no role in the Fed's supervisory framework.
The Board had initially announced in June 2025 that reputation risk would no longer be part of its examination programs. This new proposal aims to keep supervision anchored to material financial risks and improve clarity and precision for banks. The Fed clarified that the change does not alter expectations that banks maintain strong risk management for safety, soundness, and legal compliance.
The proposal is seen as a move to address the debanking of lawful businesses, including digital asset firms, by prohibiting examiners from pressuring banks over subjective reputation concerns. It builds on the 2025 decision and aims to end perceived regulatory overreach, sometimes referred to as "Operation Chokepoint 2.0."
Comments on the proposal are due within 60 days after its publication in the Federal Register, making the filing-and-feedback window the next key milestone for industry stakeholders, including the crypto sector.
