Prohibition on the Use of Reputation Risk
Key claim: The NCUA is finalizing a rule to permanently remove reputation risk as a factor in its supervisory framework and adverse action decisions, consistent with Executive Order 14331.
Abstract
(Rule · National Credit Union Administration) On October 21, 2025, the Board issued its Notice of Proposed Rulemaking to codify the elimination of reputation risk from its supervisory framework. This change aligns with Executive Order 14331, “Guaranteeing Fair Banking for All Americans.” Effective September 25, 2025, the NCUA ceased examining for reputation risk. This final rule affirms that the agency will not consider reputation risk–whether alone or in combination with other factors–in supervisory determinations or other decisions, nor will it take adverse actions on that basis.
Why this matters
Eliminating reputation risk from NCUA’s supervisory toolkit narrows the discretionary bases on which examiners can pressure credit unions over lawful but controversial customer relationships (e.g., crypto, firearms, politically sensitive sectors). It parallels similar moves by federal banking regulators under EO 14331 and signals a broader shift toward objective, financially grounded supervisory criteria across prudential regulators.