The Federal Reserve to Seek Public Comment on Proposal to Address "Banking Deserts"

BlockBeats News, February 24th, the Federal Reserve Board will seek public comment on a proposal to eliminate "banking deserts" where banks refuse to provide services based on reputation risk. The proposal restates the Committee's policy position: prohibiting punitive blanket bank service termination or customer de-risking for engaging in lawful activities or refusing to open an account for them.

Federal Reserve Vice Chair Michelle W. Bowman said, "We have noted troubling instances where banks have refused services, with regulators citing reputation risk, forcing financial institutions to end services to customers based on their political views, religious beliefs, or participation in unwelcome yet legal businesses. Discriminatory behavior by financial institutions based on the above reasons is both illegal and inconsistent with the purpose of the Federal Reserve's supervisory framework."

Last June, the Federal Reserve announced that it would no longer include "reputation risk" as part of bank regulatory examination criteria.