Key Takeaways
- The Fed opened a 60-day comment period to codify the removal of “reputation risk” from supervision.
- The move follows the Fed’s June 2025 shift and parallel proposals from the FDIC and OCC.
- Crypto firms are watching closely, but regulators are positioning the proposal as a structural policy shift.
The U.S. Federal Reserve has opened a 60-day public comment period on a proposal to formally remove “reputation risk” from its bank supervision framework.
The proposal would codify steps the Fed began taking in 2025 to strip “reputation risk” out of its examination programs.
It would also formally refocus supervision on measurable threats tied directly to safety and soundness.
Vice Chair for Supervision Michelle Bowman said the change is intended to address concerns that the concept of reputation risk has been applied in ways that are “vague and inherently subjective.”
She added that the framework has also been linked to troubling instances of “debanking.”
Why It Matters
“Reputation risk” has historically referred to the chance that negative publicity or public perception could harm a bank’s business or financial standing.
Unlike credit, liquidity, or market risk, however, reputational risk can be difficult to quantify.
Bowman argued that the category has created inconsistency in supervision and can operate as a catch-all that pulls attention away from core financial risks.
She also warned that reputational concerns can show up in informal examiner communications, which banks may treat as strong signals even when they are not formal findings.
The Fed’s proposal does not suggest banks should ignore reputational considerations in their own internal decisions.
Instead, it aims to prevent examiners from using “reputation risk” as a supervisory tool.
Examiners would need to frame concerns through established financial, operational, or compliance lenses.
A Shift Already Underway
The rulemaking builds on a June 2025 Fed announcement stating that reputational risk would no longer be part of its examination programs and that the central bank had begun removing references to the term from supervisory materials.
The current proposal is designed to “memorialize” that change through the formal rulemaking process. This would make the removal more durable and transparent.
Regulators Moving Together
The Federal Reserve’s move aligns with parallel actions by other U.S. bank regulators.
In October 2025, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) issued a joint proposal to similarly prohibit the use of reputation risk in supervision.
The OCC has described that effort as preventing criticism or adverse action based on political or religious views, as well as constitutionally protected speech.
It also aims to shield “politically disfavored but lawful” activities from supervisory pushback.
The OCC has described that effort as preventing criticism or adverse action based on political or religious views, constitutionally protected speech, or “politically disfavored but lawful” activities.
The FDIC said it is also stripping references to reputation risk from guidance and examiner manuals.
Crypto Angle and Market Context
For digital asset firms, access to banking rails remains foundational for fiat on-ramps, custody relationships, and operational liquidity.
While the Fed’s proposal is sector-neutral, the broader debanking debate has frequently intersected with crypto policy disputes.
Bitcoin traded relatively flat following the announcement. This suggests markets are treating the development as a structural regulatory shift rather than an immediate catalyst.
What Happens Next
The proposal’s 60-day public comment period begins after publication in the Federal Register.
After reviewing feedback, the Fed may finalize the rule, modify it, or introduce clarifications.
Whether it materially changes examiner behavior will depend on implementation.
However, codifying the removal of “reputation risk” narrows supervisory ambiguity at a time when banking access has become a political and regulatory flashpoint.
PhD, researcher and writer exploring AI, blockchain, and the philosophy of tech, with a focus on DeScAI, governance, and trust.
