Federal Reserve Proposes Rule to Remove Reputation Risk from Bank Supervision, Opens 60-Day Comment Period

The Federal Reserve proposed a rule on February 23, 2026, that would eliminate reputation risk as a factor in banking supervision and opened a 60-day public comment period. The proposal follows a June 23, 2025, policy shift directing supervisors to focus on financial risk management rather than reputational concerns, a change crypto advocates say could reduce debanking of lawful businesses. Fed Vice Chair for Supervision Michelle Bowman cited cases where reputation risk was allegedly used to pressure banks to drop customers over political views or involvement in certain lawful sectors, while Senator Cynthia Lummis and Galaxy Digital's Alex Thorn framed the initiative as a step toward ending what critics term "Operation Chokepoint 2.0."