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>>Federal Reserve Announces Major Shift, Proposing the Removal of “Reputation Risk” from Bank Supervision to End Debanking Bias

Federal Reserve Announces Major Shift, Proposing the Removal of “Reputation Risk” from Bank Supervision to End Debanking Bias

crypthub

about 12 hours ago

Fed Proposal Overview

The Federal Reserve announced a rule to delete “reputation risk” from bank supervision. Examiners must base decisions on quantifiable compliance or financial threats, not on a client’s legal business, politics, or religion. The change aims to stop banks from arbitrarily closing accounts for lawful but unpopular activities, including crypto firms. It creates a clearer, principle‑based framework for supervision.

Historical Context & Reactions

The proposal counters the legacy of Operation Choke Point, which used informal pressure to force banks to drop high‑risk merchants and later crypto companies. Critics called this “Operation Choke Point 2.0.” Senators such as Cynthia Lummis welcomed the move, urging Congress to handle regulation instead. Industry groups view it as a step toward reliable banking access but stress the need for precise language.

Implications and Next Steps

A 60‑day public comment period will shape the final rule, with stakeholders likely asking for definitions and examiner guidance. If adopted, banks will still refuse service for genuine AML or fraud risks, but not for disfavored legal sectors. Successful implementation requires consistent examiner training and congressional oversight. The goal is a safer, more inclusive banking system driven by objective risk.