The Federal Reserve on Monday proposed a new rule that would prohibit its examiners penalizing institutions over the “reputation risk” they face from customers—a policy shift that aligns with ongoing litigation brought by President Donald Trump against JPMorgan Chase. 

The proposed rule would effectively codify the Board’s June 2025 decision to remove “reputation risk” from its supervisory policies as part of a larger revision of its supervisory goals. Fed officials have said that that the ongoing shift is intended to enhance supervisory clarity and focus institutions on their core financial risks. 

“We have heard troubling cases of debanking, where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their political views, religious beliefs, or involvement in disfavored but lawful businesses,” said Vice Chair for Supervision Michelle W. Bowman in a statement. 

“Discrimination by financial institutions on these bases is unlawful and does not have a role in the Federal Reserve’s supervisory framework,” she said. 

Last month, Trump filed a lawsuit claiming that JPMorgan and its CEO Jamie Dimon unduly terminated accounts linked to him and other business entities following the January 6, 2021 attack on the U.S. Capitol. The lawsuit alleges that the lender failed to disclose why the accounts were “debanked” and asserts that the plaintiffs discovered later that the closures were political and ultimately discriminatory against Trump, the Trump Organization, the Trump family, and affiliated entities. 

If adopted, the rule would add a new section (12 CFR 262.9) explicating stating that the Board will not encourage or compel banks to deny or condition how they treat customers when it comes to political and religious factors or lawful but disfavored activities. 

The proposal also includes a “rule of construction” stating it would not restrict the Board’s authority to implement and enforce applicable law, including the Bank Secrecy Act and sanctions programs administered by the Treasury Department’s Office of Foreign Assets Control, among other statutes. 

In moving to scale back debanking under Trump administration, the Fed is not alone. In December, the OCC concluded that nine major U.S. banks had improperly imposed enhanced risk controls on controversial clients who were the subject of negative media reports. In October, the FDIC advanced a proposed rule that bar its examiners from pressuring banks into closing accounts due on political, social, cultural, or religious grounds. 

Read more from the Federal Reserve here