- OCC and FDIC proposed rules to bar use of “reputation risk” in supervision and to scrub it from guidance, limiting pressure on banks to deny services for non-financial reasons.
- Congressional bills including the FIRM Act and the Fair Access to Banking Act would codify these changes and require agency reporting to curb politically or ideologically driven debanking.
- ACA International and other banking trade groups back the shift as clearer, more objective oversight focused on material financial risk and improved access for targeted industries.
- Key uncertainties are how “reputation risk” is defined and policed, what accountability mechanisms exist, and whether banks or regulators will find new workarounds in practice.
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The proposed reforms—issued jointly by the OCC and FDIC in October 2025—seek to formally eliminate the use of “reputation risk” as a basis for supervisory criticism, adverse action, or pressure on banks to close accounts or deny services, especially when those actions are related to political, social, cultural, or religious views or protected speech. The proposed rule also requires the removal of reputation risk language from existing regulatory and guidance documents.
The legislative side has picked up the baton. Key bills include the Financial Integrity and Regulation Management (FIRM) Act, introduced by Reps. Andy Barr and Ritchie Torres, and companion legislation in the House and Senate. These bills would codify the elimination of reputation risk in regulation, as well as require federal agencies to report to Congress on their compliance. Additionally, the Fair Access to Banking Act has been reintroduced in both chambers, with ACA International specifically lending support.
Various industry stakeholders have issued supportive statements. The Independent Community Bankers of America highlighted benefits for community banks in reducing subjectivity and focusing supervision on materially financial risk. The American Bankers Association noted transparency gains and applauded prohibiting agencies from taking actions tied solely to reputational concerns, separate from objective risks.
However, the transformation raises important implementation challenges. First, the definition of “reputation risk” that supervisors would use—and which they would no longer rely on—needs to be clear to avoid creating alternative vectors for subjective enforcement. The proposed rule defines it broadly as risks to public perception unrelated to actual or future financial condition. Second, developing oversight and reporting mechanisms will be crucial for accountability, especially as supervisors previously used reputation risk informally. Third, there is risk of unintended consequences: institutions might err toward risk-averse behavior to avoid reputational controversies, even if safety and soundness aren’t at issue. Finally, industries historically hit hardest by debanking (e.g., debt collectors, firearms, e-cigarettes, oil and gas) will want to see how uniform or varied the protections prove across states and agency jurisdictions.
Strategically, these reforms could shift the power dynamics between banks, clients, and regulators. Banks may gain more autonomy in business decision-making, particularly with respect to which clients and industries they serve—as long as safety/compliance concerns are met. This might also redefine how financial institutions approach risk public relations: reputational implications will still matter, but the threat of regulatory sanction tied to those implications will be diminished. On the flip side, regulators may need to rely more heavily on traditional risk metrics (credit, liquidity, operational), potentially reducing their flexibility to address emerging risks that lie more in public perception or systemic trust.
From an investment banking perspective, these changes could reshape deal dynamics: clients in controversial or politically sensitive industries may find it easier to access capital, banking services, or payment processing; sectors previously labeled “high risk” for non-financial reasons may see prospects improve; regulatory risk for banks engaging with such clients should decline—assuming the rule is finalized and enforced faithfully.
Supporting Notes
- OCC and FDIC issued a proposed rule on October 7, 2025 to eliminate reputation risk from supervisory programs, including prohibitions on adverse actions or requiring account closures based on political/social/cultural/religious views or lawful but politically disfavored activities.
- The FDIC also removed references to reputation risk from its examination manuals and other supervisory documents to align with the proposed rule.
- The proposed rule applies to all financial institutions supervised by the FDIC and OCC, including community banks.
- The FIRM Act, introduced in April 2025, would eliminate all references to reputation risk in supervision and require agencies to report to Congress on its elimination.
- ACA International supports the Fair Access to Banking Act and has expressed concern about ongoing categorical discrimination against the debt collection industry.
- Industry groups like ICBA and ABA have publicly praised the proposed reforms, highlighting enhanced clarity, reduced subjective interference, and robust supervision centered on material financial risks.