The Federal Reserve has initiated a public comment period on a proposal to permanently strip "reputation risk" from its bank supervisory framework. This move aims to codify a policy shift first announced last year, intended to address concerns over "debanking" within the cryptocurrency industry and other lawful sectors.
The proposal seeks to formalize the Fed's position that supervisory decisions should not penalize banks for serving customers involved in legal activities, even if those activities are politically or socially sensitive. It builds upon a clarification issued in June 2025 stating that reputation risk would no longer be a factor in bank examination programs.
"We have heard troubling cases of debanking — where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their political views, religious beliefs, or involvement in disfavored but lawful businesses," said Vice Chair for Supervision Michelle W. Bowman. She emphasized that such discrimination "does not have a role in the Federal Reserve's supervisory framework."
The proposal has garnered support from some lawmakers. Senator Cynthia Lummis welcomed the step in a post on X, stating, "Glad to see this important step to permanently remove 'reputation risk' from Fed policy and put Operation Chokepoint 2.0 to rest." The term "Operation Choke Point 2.0" is used by some crypto advocates and politicians to describe alleged coordinated regulatory pressure on banks to avoid digital asset firms.
The policy change emerges amidst a politically charged backdrop. It follows a lawsuit filed by former President Donald Trump against JPMorgan Chase, alleging his accounts were closed for political reasons—a claim the bank disputes. Public comments on the Fed's proposal are due within 60 days of its publication in the Federal Register.
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