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Regulators say they rescinded 'reputational risk' language as lawmakers probe debanking claims
Summary
At a House hearing, OCC and Fed leaders told lawmakers they have eliminated 'reputational risk' from exam vernacular and are auditing past supervisory activity after allegations that prior guidance pressured banks to cut off lawful customers.
The committee pressed regulators on allegations of ‘‘debanking’’ and regulatory pressure against lawful industries. Ranking Member Maxine Waters opened with a pointed critique, saying she remained ‘‘outraged’’ about what she depicted as threats to independent supervision and a pattern that could harm consumers.
Comptroller Jonathan Gould told lawmakers the OCC is reviewing historical correspondence and complaints and has proposed a rule to eliminate ‘‘reputational risk’’ from examinations. ‘‘We have already proposed a rule to eliminate reputation risk from supervision,’’ Gould said, and noted the OCC disclosed redacted correspondence and has investigated prior activities.
Vice Chair Michelle Bowman said the Federal Reserve has ‘‘eliminated reputational risk within our examination context’’ and is auditing supervisory activity across the Board and Reserve Banks to identify actions inconsistent with the president’s executive order. She described interagency steps to make the change durable, including proposed rule language similar to measures from the OCC and FDIC.
Members on both sides cited the committee’s staff report on ‘‘Operation Chokepoint 2’’ and asked whether the agencies had seen evidence of political or religious discrimination by banks. Gould said the OCC has received allegations and is sifting through complaints and working with other agencies; he cautioned that investigations are ongoing and results will be shared when complete.
Rep. Meachs asked whether the agencies had safeguards to prevent regulatory pressure in the current administration. Regulators said they are taking steps to codify limits and conduct audits of past supervisory conduct.
What to watch: Regulators pledged follow‑up reporting and the committee will collect written responses; the agencies are taking steps to formalize the removal of reputational risk from exam practice.
