• FDIC and OCC will no longer use reputational risk in supervision
• Regulators argue reputational risk lacks value for safety and soundness
• The move follows conservative backlash over alleged “de-banking”
• Capital One faces lawsuit from Trump Organization over account closures
• The crypto industry has also criticized reputational risk as anti-innovation
• FDIC promises a new digital asset policy and overhaul of examiner training

In a sweeping move poised to reshape financial oversight, U.S. banking regulators are eliminating reputational risk as a supervisory metric, ending a long-standing — and increasingly controversial — element of bank examinations. 

The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) both confirmed this month that they will cease referencing reputational risk in their regulatory frameworks, sparking celebration in conservative circles and concern among compliance professionals. 

The FDIC’s acting chairman, Travis Hill, laid out the rationale in a March 24 letter to Rep. Dan Meuser, who chairs the House Subcommittee on Oversight and Investigations. 

Hill wrote that reputational risk, while conceptually important, overlaps substantially with other forms of risk like credit or market risk — areas already monitored by regulators.

“Reputational risk has been abused in the past and adds no value from a safety and soundness perspective as a standalone risk,” Hill said. He added that the FDIC had completed a review of all internal references to the term and “plans to eradicate this concept from our regulatory approach.” 

The OCC echoed that sentiment just days earlier, stating it would cease examining banks for reputational risk and remove all references to it from its guidance. 

Meanwhile, on Capitol Hill, Senate Banking Committee Chair Tim Scott introduced legislation to eliminate reputational risk as a factor in determining bank soundness, calling it the first step in halting the controversial practice of "de-banking" – the closing of accounts based on perceived political or reputational concerns.

These moves appear to be a direct response to mounting political pressure. Former President Donald Trump in January accused JPMorgan Chase and Bank of America of “de-banking” conservative clients. Both banks denied the claims, stating unequivocally that political views do not influence account closures.

“We have never and would never close an account for political reasons, full stop,” a JPMorgan spokesperson said. CEO Jamie Dimon further dismissed the idea, saying during a podcast that “when we debank someone, they often blame that reason, but that’s not a reason.”

Bank of America CEO Brian Moynihan, speaking in February, suggested the real issue lies in “over-regulation,” reinforcing the industry’s desire for more clarity and less subjectivity in regulatory assessments.

The Trump administration escalated the fight this month, suing Capital One for allegedly terminating around 300 accounts due to political bias — a charge the bank has yet to address publicly.

The lawsuit alleges that Capital One made the decision because “the political tide at the moment favored doing so.”

The crypto industry has also long expressed frustration over reputational risk. Executives in the sector have accused regulators of leveraging the vague metric to discourage banks from engaging with digital asset firms. Acting Chair Hill acknowledged this history in his letter, stating the FDIC was “closed for business” to banks exploring blockchain and crypto technologies but is now “actively working on a new direction on digital assets policy.”

The FDIC’s shift will not be instant. Hill described a multiyear process that will involve re-educating examiners, overhauling supervisory guidance, and setting a new tone from leadership.

Still, the message is clear: regulators are distancing themselves from subjective, politically sensitive assessments in favor of a more streamlined, quantifiable approach to bank risk.

For risk professionals and compliance teams, the demise of reputational risk as a formal metric marks a significant turning point — and opens the door to both deregulatory momentum and intensified political scrutiny.