TLDR
- The Federal Reserve launched a public comment window for its plan to eliminate reputation risk from bank supervision practices.
- This regulatory change would prevent financial institutions from denying services to legitimate businesses for political or social reasons.
- Vice Chair Michelle W. Bowman emphasized that supervisory staff should avoid using reputation risk as grounds to influence banking relationships.
- Senator Cynthia Lummis endorsed the measure, saying it advances the fight against practices labeled Operation Chokepoint 2.0.
- Republican members of the Senate Banking Committee declared that lawful activity and personal beliefs should never determine banking eligibility.
The Federal Reserve announced a public feedback period for its initiative to eliminate reputation risk from supervisory practices, marking a significant policy adjustment designed to safeguard banking relationships for legitimate clients while responding to allegations surrounding “Operation Chokepoint 2.0.”
Details of the Federal Reserve’s Supervisory Proposal
The Federal Reserve introduced a regulatory measure that would officially strike reputation risk from its oversight framework, explaining that this modification would anchor decisions in quantifiable financial metrics. This initiative builds upon a 2025 guidance update that eliminated reputation risk from examination protocols, aiming to preserve financial access for lawful commercial entities.
Michelle W. Bowman revealed that the Fed received reports of “troubling cases of debanking,” emphasizing that such considerations should remain separate from regulatory oversight. She declared that discriminatory practices hold “no role” within the banking system, highlighting that examiners must evaluate only substantive financial risks.
The Fed announced that the comment period will extend for 60 days, encouraging interested parties to examine the proposal thoroughly. The regulatory body highlighted that transparent guidelines promote equitable results, noting that financial institutions should maintain uniform standards across all legitimate clientele.
Digital currency companies previously voiced concerns regarding account terminations, contending that reputation risk considerations deterred banks from providing services. This proposal addresses those complaints, stressing equal treatment across every lawful business sector.
Congressional Response to Chokepoint Allegations
Senator Cynthia Lummis praised the proposal, stating that it benefits digital asset companies pursuing banking relationships. She contended that regulatory authorities should avoid overreach, claiming the measure will help eliminate Operation Chokepoint 2.0.
The Senate Banking Committee GOP account supported her statement, asserting that ideological or spiritual affiliations should have zero impact on account eligibility. The account stated that this proposal brings regulators closer to eliminating debanking practices, calling for broad public participation in the rulemaking process.
President Donald Trump vowed to terminate Operation Chokepoint 2.0, citing grievances from cryptocurrency enterprises and other organizations. His position intensified regulatory scrutiny, elevating the matter within broader political discourse.
Cryptocurrency industry leaders reported that supervisory pressure restricted standard banking services, asserting that institutions worried about examination consequences. They referenced historical conflicts involving digital asset companies, maintaining that regulatory transparency remained essential.
Banking Disputes and Legal Proceedings
JPMorgan Chase revealed in recent court documents that it terminated several Trump accounts during February 2021, stating that litigation connected to those closures holds no legal foundation. The financial institution publicly acknowledged the account terminations for the first time, asserting that its decisions followed established internal protocols.
Trump initiated a $5 billion legal action this year, alleging that the closures carried political motivations. He claimed his accounts faced targeting following January 6 events, contending that banks should avoid making services contingent upon personal viewpoints.
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