On October 7, 2025, the OCC and the FDIC issued two separate notices of proposed rulemaking designed to refocus supervisory practices and enhance clarity around enforcement standards. Both proposals reflect a broader regulatory shift toward prioritizing material financial risks and ensuring consistency in supervisory expectations.
Proposal 1: Eliminating Reputation Risk from Supervisory Frameworks
The first proposal would codify the elimination of “reputation risk” as a basis for supervisory criticism or enforcement action. Under the proposed rule, the agencies would be prohibited from:
Taking adverse action against a financial institution solely on the basis of perceived reputation risk.
Instructing, encouraging, or pressuring institutions to terminate customer accounts due to political, social, cultural, or religious views; constitutionally protected speech; or participation in lawful but politically disfavored business activities.
This proposal directly responds to concerns outlined in Executive Order 14331, Guaranteeing Fair Banking for All Americans, which highlighted the potential for misuse of reputation risk as a pretext to deny access to financial services for lawful individuals or entities.
Proposal 2: Clarifying “Unsafe or Unsound Practices” and Supervisory Communications
The second proposal focuses on enhancing consistency in how the agencies define and apply supervisory standards, including:
Defining the term “unsafe or unsound practice” for purposes of enforcement under Section 8 of the Federal Deposit Insurance Act, providing greater clarity for institutions subject to supervisory actions.
Revising the framework for Matters Requiring Attention (MRAs) and other supervisory communications to ensure that supervisory concerns are focused on material financial risk.
Standardizing when and how MRAs and non-binding observations are issued, and allowing for tailored enforcement actions based on the specific risk profile of each institution.
This proposal is intended to ensure that supervisory focus remains on issues that could materially impact the safety and soundness of institutions, rather than procedural or documentation issues that do not pose financial risk.
Both proposals are subject to a 60-day public comment period following their publication in the Federal Register.
The FDIC’s press release regarding the prohibition of the use of reputation risk can be found here.
The FDIC’s press release regarding material financial risk can be found here.