Federal Reserve to Address Banking Service Refusal Due to Reputation Risk

On February 24, the Federal Reserve Board will seek public comments on a proposal aimed at eliminating measures where banks refuse services due to reputation risk. According to BlockBeats, the proposal reiterates the committee's policy stance against punitive denial of banking services or account openings for customers engaged in lawful activities. Federal Reserve Vice Chair Michelle W. Bowman highlighted concerning instances where banks have refused services, citing reputation risk. Regulatory bodies have pressured financial institutions to terminate services based on customers' political views, religious beliefs, or involvement in unpopular but legal businesses. Bowman emphasized that such discriminatory actions are illegal and contrary to the Federal Reserve's regulatory framework. In June of last year, the Federal Reserve announced it would no longer include "reputation risk" as part of its bank regulatory examination program.