Letter to the Board on the Notice of Proposed Rulemaking on the Prohibition of Using Reputation Risk as a Supervisory Tool

Dear Sir or Madam,

The American Bankers Association (ABA) is pleased to support the proposal (Proposal) of the Board of Governors of the Federal Reserve System ('Federal Reserve' or 'Board') to codify the elimination of reputation risk from its supervisory programs.

The Proposal appropriately prohibits the Federal Reserve from criticizing or taking adverse action against an institution on the basis of reputation risk, and from encouraging or compelling institutions to terminate or modify relationships based on political, social, cultural, or religious views. As the Board notes, "...reputation risk can be difficult to quantify and communicate," and the proposal "would increase supervisory clarity…and would facilitate greater precision in supervisory decision making."

Additionally, ABA appreciates the Board's important acknowledgment that "the proposed rule is not intended to impact the ability of banking organizations to manage their businesses and make independent decisions regarding their customers."

Although it is our understanding that the Federal Reserve has largely completed revising its examination manuals and other supervisory policy documents to accomplish the Proposal’s objectives, as the Board announced in June 2025, ABA agrees that the Board should also adopt the Proposal as a final regulation to increase the transparency and consistency of the supervisory process.

The Proposal will enhance objectivity in supervision and allow the Board to focus its resources on material risks to the financial condition of a firm. ABA commends the Federal Reserve for taking steps to promote transparency and consistency in supervision.

The ABA supports the Proposal and urges the Federal Reserve to finalize it promptly.

Thank you for your attention to this matter. Should you have any questions, please do not hesitate to contact the undersigned at [email protected] or (202) 663-5042.

Very truly yours,