The NCUA on Monday formally proposed a rule to prohibit the use of “reputation risk” or similar concepts in its examination and supervisory framework, codifying changes first announced in late September.
The proposed rule, published in the Federal Register, would bar examiners from criticizing or taking any adverse action against a credit union based solely on perceived reputational concerns. It would also prevent the agency from pressuring institutions to deny or terminate services because of a person or organization’s political, social or religious views, or their involvement in politically disfavored but lawful businesses.
The rule stems from President Donald Trump’s Executive Order 14331, Guaranteeing Fair Banking for All Americans, which directed regulators to eliminate supervisory standards that could enable politicized or unlawful “debanking.”
In September, the NCUA announced it had already ceased referencing reputation risk during examinations, with agency staff instructed to focus instead on quantifiable safety and soundness risks such as credit, liquidity or transaction risk. The agency emphasized that this change would not materially alter CAMELS ratings or supervisory outcomes, but would streamline exams and reduce examiner subjectivity.
The NCUA’s filing argued that reputation risk is “ambiguous, lacks measurable criteria, and has not proven to be a driver of unsafe or unsound conditions.” It said codifying the prohibition will “increase consistency, predictability and fairness” across the credit union system.
The proposal explicitly forbid the NCUA from using reputation risk as a basis for supervisory criticism, downgrades or conditions placed on approvals. It also clarified that the rule will not affect compliance with anti–money laundering, sanctions or field-of-membership laws.
Public comments on the proposed rule are due 60 days after publication, under docket number NCUA-2025-0972.
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