The Federal Reserve is proposing a new rule to prevent supervisors from pressuring banks to cut off lawful customers. This action comes after instances of "debanking," where institutions were allegedly pressured to terminate relationships based on political views, religious beliefs, or involvement in lawful but disfavored businesses like cryptocurrency.
Vice Chair for Supervision Michelle W. Bowman stated that discrimination by financial institutions on these bases is unlawful and has no place in the Federal Reserve's supervisory framework. The Office of the Comptroller of the Currency previously removed reputational factors from its supervision, and this new rule aims to codify similar changes for the Federal Reserve.
The proposal seeks to remove "reputation risk" from the Fed's supervisory programs and prohibit the agency from compelling banks to deny services to customers engaged in "politically disfavored but lawful business activities."
The Fed is accepting public comments on this proposal for 60 days.