Federal Reserve Moves to Curb Debanking With Proposal Ending Rep-Risk

TLDR

• The Federal Reserve opened a public comment period on its plan to remove reputation risk from its supervisory framework.
• The proposal aims to prevent banks from limiting access to lawful businesses based on political or social concerns.
• Vice Chair Michelle W. Bowman stated that supervisors should not use reputation risk to pressure banks to drop lawful clients.
• Senator Cynthia Lummis praised the proposal and said it supports efforts to end what critics call Operation Chokepoint 2.0.
• The Senate Banking Committee GOP account said no American should lose banking access because of personal beliefs or lawful activity.

The Federal Reserve opened a public comment window on its plan to remove reputation risk from supervision, and it outlined a policy shift that aims to prevent banks from limiting lawful clients, and it moved to address concerns tied to “Operation Chokepoint 2.0.”

Fed Proposal on Reputation Risk

The Federal Reserve proposed a rule that would formally remove reputation risk from its supervisory framework, and it said the change would ensure decisions rely on financial factors. The plan follows a 2025 clarification that removed reputation risk from examinations, and it seeks to protect access for lawful businesses under review.

Michelle W. Bowman said the Fed heard “troubling cases of debanking,” and she stressed that such actions should not shape oversight. She stated that discrimination has “no role” in the system, and she underscored that supervisors must assess only material risks.

The Fed confirmed that comments will remain open for 60 days, and it directed stakeholders to review the proposal carefully. The agency emphasized that clarity supports fair outcomes, and it added that banks should apply consistent standards to all lawful clients.

Crypto firms previously raised concerns about debanking, and they argued that reputation risk discouraged banks from serving them. The proposal seeks to address these issues, and it emphasizes neutral treatment for every lawful sector.

Operation Chokepoint 2.0 Debate

Senator Cynthia Lummis welcomed the proposal, and she said it supports digital asset firms seeking banking access. She argued that “it’s not the Fed’s role to play both judge and jury,” and she claimed the rule will help end Operation Chokepoint 2.0.

The Senate Banking Committee GOP account echoed her position, and it argued that political or religious views should not affect account access. It stated that the proposal moves regulators closer to ending debanking, and it urged public engagement with the rule.

President Donald Trump pledged to end Operation Chokepoint 2.0, and he referenced complaints from crypto firms and other groups. His stance added pressure to regulators, and it pushed the issue into wider political debate.

Crypto executives said regulatory pressure limited routine banking options, and they claimed banks feared supervisory outcomes. They pointed to past disputes involving digital asset platforms, and they argued that regulatory clarity remained necessary.

Legal and Political Context

JPMorgan Chase disclosed in a recent filing that it closed multiple Trump accounts in February 2021, and it said the lawsuit tied to those closures lacks merit. The bank confirmed the closures for the first time, and it maintained that its actions followed internal policies.

Trump filed a $5 billion lawsuit earlier this year, and he alleged the closures were political. He said his accounts were targeted after January 6, and he argued that banks should not condition services on viewpoints.

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