FDIC Prohibits Examiners from Considering Reputation Risk

The move is seen as a gift to the crypto industry and a threat to banking system oversight.

Apr. 7, 2026 at 6:48pm

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An extreme close-up of the heavy, industrial mechanisms of a bank vault door, conveying a sense of institutional power and financial security, yet also the potential for hidden risks.The FDIC's decision to prohibit examiners from considering reputation risk could allow banks to forge relationships with controversial clients, exposing the financial system to unseen dangers.NYC Today

The Federal Deposit Insurance Corporation (FDIC) Board, which includes the Office of the Comptroller of the Currency, has voted to finalize a rule that prohibits bank examiners from considering 'reputation risk' when evaluating the safety and soundness of banking practices. Critics argue this will strip examiners of essential judgment, reduce supervision to a box-checking exercise, and increase the likelihood of missed risks that could lead to future banking scandals or crises.

Why it matters

Considering reputation risk has been a critical tool used for decades to identify misconduct, weak governance, and dangerous banking practices and relationships before they spiral into lawbreaking, bank failures, and systemic crises. Removing this oversight could allow banks to engage with high-risk clients and activities without proper scrutiny.

The details

The FDIC's decision means examiners will no longer be able to consider a bank's reputation, past misconduct, or associations with individuals like convicted sex offender Jeffrey Epstein when evaluating the institution's safety and soundness. Critics say this is effectively a move to 'provide more banking services to the Jeffrey Epsteins of the world' and prevent proper regulation of the volatile crypto industry, which they argue is often used by global criminals.

  • The FDIC Board voted to finalize the rule on April 7, 2026.

The players

Dennis Kelleher

Co-Founder, President, and CEO of Better Markets, a non-profit organization that promotes financial reform and consumer protection.

Federal Deposit Insurance Corporation (FDIC)

The independent government agency that insures deposits in U.S. banks and oversees the safety and soundness of the banking system.

Office of the Comptroller of the Currency (OCC)

A bureau of the U.S. Department of the Treasury that charters, regulates, and supervises national banks and federal savings associations.

Jeffrey Epstein

A convicted sexual predator and registered sex offender who had banking relationships with several major financial institutions.

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What they’re saying

“The FDIC Board ignoring those warnings was irresponsible, and depositors and the banking system will pay for that in the future.”

— Dennis Kelleher, Co-Founder, President, and CEO of Better Markets

“This is not just a policy mistake—it is yet another step to the next banking scandal if not crisis. The FDIC's statutory mission—the very reason it exists—is to ensure the safety and soundness of the banking system and to protect depositors. Today's decision undermines both.”

— Dennis Kelleher, Co-Founder, President, and CEO of Better Markets

What’s next

The FDIC's decision is expected to face legal challenges from consumer advocates and financial reform groups concerned about the implications for banking oversight and consumer protection.

The takeaway

This move by the FDIC is seen as a gift to the crypto industry and its political allies, at the expense of robust banking supervision and the prevention of future financial crises. It raises concerns about the influence of special interests on financial regulation and the potential erosion of safeguards meant to protect the stability of the banking system.