The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) issued a final rule to codify the elimination of reputation risk from their supervisory programs. The final rule, which becomes effective June 9, 2026, adopts the proposed rule with minor modifications and formalizes in federal regulations the removal of reputation risk. The final rule prohibits the OCC and FDIC from performing the following activities in supervisory programs:

  • Criticizing or taking adverse action against an institution on the basis of reputation risk;
  • Requiring, instructing, or encouraging an institution to (i) close an account, (ii) refrain from providing an account, product, or service, or (iii) modify or terminate any product or service on the basis of a person or entity’s political, social, cultural, or religious views or beliefs, constitutionally protected speech, or solely on the basis of politically disfavored but lawful business activities perceived to present reputation risk (excluding compliance for persons or entities sanctioned by the Office of Foreign Assets Control); and
  • Taking any supervisory action or other adverse action against an institution, a group of institutions, or the institution-affiliated parties of any institution that is designed to punish or discourage an individual or group from engaging in any lawful political, social, cultural, or religious activities, constitutionally protected speech, or, for political reasons, lawful business activities that the agencies or its personnel disagree with or disfavor.

The final rule defines reputation risk to mean “any risk, regardless of how the risk is labeled by the institution or regulators, that an action or activity, or combination of actions or activities, or lack of actions or activities, of an institution could negatively impact public perception of the institution for reasons not clearly and directly related to the financial or operational condition of the institution.”

The final rule broadly defines “adverse action” to include:

  • Any negative feedback delivered by or on behalf of the OCC to the supervised institution, including in a report of examination or a formal or informal enforcement action;
  • A downgrade, or contribution to a downgrade, of any supervisory rating, including, but not limited to:
    • Any rating under the Uniform Financial Institutions Rating System (or any comparable rating system);
    • Any rating under the Uniform Interagency Consumer Compliance Rating System;
    • Any rating under the Uniform Rating System for Information Technology; and
    • Any rating under any other rating system;
  • A denial of a licensing application;
  • Inclusion of a condition on any licensing application or other approval;
  • Imposition of additional approval requirements;
  • Any other heightened requirements on an activity or change;
  • Any adjustment of the institution’s capital requirement; and
  • Any action that negatively impacts the institution, or an institution-affiliated party, or treats the institution differently than similarly situated peers.

The prohibition on the use of reputation risk is codified in 12 C.F.R. § 4.91 for the OCC and 12 C.F.R. § 302.100 for the FDIC.

The OCC and FDIC cite the following reasons, among others, for the prohibition:

  • Using reputation risk as a basis for supervisory criticisms increases subjectivity and unpredictability without adding any material value from a safety and soundness perspective
  • No clear evidence shows that supervisory interference to protect the banks’ reputations has actually protected banks from losses or improved banks’ performance
  • Institutions and agencies should devote resources to managing concrete and quantifiable financial risks that have been shown to present significant threats to institutions, such as credit risk, liquidity risk, and interest rate risk
  • Reputation risk does not predict bank failures.

The Federal Reserve Board (the Board) issued a notice of proposed rulemaking to codify the removal of reputation risk from the Board’s supervisory programs in February with comments due by April 27, 2026 that includes a general prohibition on the use of reputation risk in 12 C.F.R. § 262.9. We expect the Board’s final rule to include similar language from the FDIC and OCC’s final rule.

In 2025, the federal agencies signaled that these changes were coming. On March 20, 2025, the OCC removed reputation risk from its Comptroller’s Handbook booklets and guidance issuances and instructed its examiners that they should no longer examine for reputation risk. In a March 24, 2025 letter to the U.S. House Subcommittee on Oversight and Investigations, Acting FDIC Chairman Travis Hill stated that the FDIC has reviewed all mentions of reputational risk in regulation, guidance, examination manuals and other policy documents and planned to eradicate reputation risk from the FDIC’s regulatory approach. On June 23, 2025, the Board announced that reputational risk would no longer be a component of its bank examinations.

The removal or reputation risk from examinations is a positive development for the banking industry and will enable banks to focus on measurable risks.

Please reach out to Winthrop & Weinstine’s Banking Regulatory team if you have any questions about this final rule or regulatory compliance.

April 15, 2026