[Federal Register Volume 91, Number 121 (Thursday, June 25, 2026)]
[Rules and Regulations]
[Pages 38270-38275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-12856]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 702 and 791
RIN 3133-AF67
Prohibition on the Use of Reputation Risk
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: 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.
DATES: This final rule is effective on July 27, 2026.
FOR FURTHER INFORMATION CONTACT: Office of Examination and Insurance:
Michael Dondarski, Associate Director, at (703) 548-2638 or at 1775
Duke Street, Alexandria, VA 22314. Office of General Counsel: Ariel
Woodard-Stephens, Staff Attorney, Office of General Counsel, at (703)
609-5926 or at the above address.
SUPPLEMENTARY INFORMATION:
I. Introduction
On October 21, 2025, the Board issued its Notice of Proposed
Rulemaking to codify the elimination of reputation risk from its
supervisory framework.\1\ Among other things, the proposed rule would
also have prohibited the agency from requiring, instructing, or
encouraging an institution to close an account, to refrain from
providing an account, product, or service, or to modify or terminate
any product or service on the basis of a person or entity's political,
social, cultural, or religious views or beliefs, constitutionally
protected speech, or solely on the basis of politically disfavored but
lawful business activities perceived to present reputation risk.\2\ The
proposed rule further would restrict the NCUA from taking any
supervisory action or other adverse action against a credit union, a
group of credit unions, or the institution-affiliated parties of any
credit union that is designed to punish or discourage an individual or
group from engaging in any lawful political, social, cultural, or
religious activities, constitutionally protected speech, or, for
political reasons, lawful business activities that the agency or its
personnel disagree with or disfavor. Interested readers may refer to
the proposed rule preamble for a more detailed overview of the
background on this rulemaking. The Board is now finalizing the
proposal.
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\1\ 90 FR 48409 (Oct. 25, 2025).
\2\ 90 FR 48410.
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II. Legal Authority
The Board is issuing this final rule pursuant to its authority
under the Federal Credit Union (FCU) Act. Under the FCU Act, NCUA is
the chartering and supervisory authority for FCUs and the federal
supervisory authority for federally insured credit unions (FICUs).\3\
The FCU Act grants NCUA a broad mandate to issue regulations governing
both FCUs and all FICUs. Section 120 of the FCU Act is a general grant
of regulatory authority and authorizes the Board to prescribe rules and
regulations for the administration of the FCU Act.\4\ Section 207 of
the FCU Act is a specific grant of authority over
[[Page 38271]]
share insurance coverage, conservatorships, and liquidations.\5\
Section 209 of the FCU Act is a plenary grant of regulatory authority
to issue rules and regulations necessary or appropriate to carry out
its role as share insurer for all FICUs.\6\ Accordingly, the FCU Act
grants the Board broad rulemaking authority to ensure that the
federally insured credit union industry and the National Credit Union
Share Insurance Fund (Share Insurance Fund) remain safe and sound.
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\3\ 12 U.S.C. 1752-1775.
\4\ 12 U.S.C. 1766(a).
\5\ 12 U.S.C. 1787.
\6\ 12 U.S.C. 1789.
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Based on the legal authorities set forth previously, the
subjectivity of reputation risk, the limited value of reputational risk
at identifying risks to safety and soundness or other statutory
mandates, and the potential for distracting examiners and institutions
from examining or managing core financial and operational risks, the
agency now codifies the removal of reputation risk from its supervisory
framework and NCUA's regulations.
III. Notice of Proposed Rulemaking and General Summary of Comments
The notice of proposed rulemaking preceding this rule affirmed the
agency's commitment to eliminating subjective considerations from its
extensive supervisory framework \7\ following the issuance of Letter to
Credit Unions 25-CU-05 ``Elimination of Reputation Risk.\8\ In
response, the NCUA received 56 comments from individual FICUs, state
and regional credit union organizations, credit union trade
organizations, credit union consulting services providers, and
individuals.\9\ Approximately 21 of the comments were form letters
sharing identical first paragraphs and similar supports to those made
in the non-form comment letters agreeing with the Board's decision to
remove reputation risk from the NCUA's supervisory program.\10\
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\7\ 90 FR 48409 (Oct. 25, 2025).
\8\ Available at: https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/elimination-reputation-risk.
\9\ https://www.regulations.gov/document/NCUA-2025-0972-0001.
\10\ ``My small credit union will benefit from these proposed
prohibitions, because there will be greater consistency and
predictability in examinations. The removal of reputation risk from
the supervisory framework will reduce uncertainty because NCUA
examiners will now focus on concrete, measurable core financial and
operational risks rather than subjective perceptions that are
inherent in reputational risk assessments.'' NCUA-2025-0972-0007;
NCUA-2025-0972-0009; NCUA-2025-0972-0010; NCUA-2025-0972-0011; NCUA-
2025-0972-0012; NCUA-2025-0972-0014; NCUA-2025-0972-0015; NCUA-2025-
0972-0016; NCUA-2025-0972-0022; NCUA-2025-0972-0023; NCUA-2025-0972-
0025; NCUA-2025-0972-0026; NCUA-2025-0972-0027; NCUA-2025-0972-0028;
NCUA-2025-0972-0030; NCUA-2025-0972-0033; NCUA-2025-0972-0034; NCUA-
2025-0972-0035; NCUA-2025-0972-0036; NCUA-2025-0972-0037; NCUA-2025-
0972-0038.
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The agency received three comments opposing the NPRM. Two were non-
responsive,\11\ while one comment was in direct substantive opposition
to the proposed rule, citing extreme weather events, a current
consideration for reputation risk, as an early warning system for
emerging stress on credit unions.\12\
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\11\ One comment raised procedural objections, mistaking the
NPRM for an interim final rule; NCUA-2025-0972-0006; the second also
indicates confusion by the reader; objecting to the use of
reputation risk as an independent or implicit basis for supervisory
or enforcement action, which is inapposite for the instant proposed
regulatory action removing reputation risk from the NCUA's
supervisory framework, ultimately rendering the comment non-
responsive. NCUA-2025-0972-0040.
\12\ NCUA-2025-0972-0049.
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The Board believes NCUA's supervisory framework is comprehensive
without speculation on whether weather-related risks will create safety
and soundness issues. By removing reputation risk as a subjective
component of the examination, NCUA is focusing its exams on objective
risk factors, like financial indicators and trends and compliance with
laws and regulations.\13\ The Board is focused on the availability of
existing objective frameworks for operational or transactional risks
unrelated to an institution's operational condition and reorienting
financial supervision toward measurable realities--credit, liquidity,
and earnings risk--rather than speculation surrounding public
perception.
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\13\ https://www.regulations.gov/comment/NCUA-2025-0972-0017
(``. . .The rule also helps reorient financial supervision toward
measurable realities--credit, liquidity, and operational risk--
rather than conjecture about public perception. In doing so, it
upholds fairness, reduces opportunities for bias, and promotes
confidence that regulatory authority is exercised with objectivity
and restraint.)
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On balance, the comments received were largely in favor of the
removal of reputation risk from the NCUA's supervisory framework. The
Board believes that reputational considerations are inherently
subjective and rarely manifest in objective risk. The Board views
objective risks as those that, based on objective facts and sound
reasoning, have or could result in financial losses, an unsafe or
unsound condition, or a violation of a banking or credit union-related
law or regulation. Agency policies require examiners to complete exams
that are tailored to focus on identifying and addressing those
objective material risks.
NCUA is responsible for regulating and supervising all FICUs,
including for safety and soundness principles.\14\ In furtherance of
these objectives, the agency's supervision should focus on concrete,
material risks and more objective criteria directly related to
applicable statutory and regulatory requirements. In the agency's
experience, using reputation risk in its supervisory process does not
further this mission.
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\14\ See, e.g., 12 U.S.C. 1756, 1781, 1784, 1786, 1789. The NCUA
also insures member accounts at all FICUs and manages liquidations
of insolvent FICUs.
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Commenters recommended that the Board consider amending proposed 12
CFR 791.22(g) to prohibit supervisory actions motivated by the
disagreement or disapproval of any agency official or employee, not
merely the views of the assigned supervisor. Proposed paragraph (g)
stated that the agency will not ``take any supervisory action or other
adverse action against an institution, a group of institutions, or the
institution-affiliated parties of any institution that is designed to
punish or discourage an individual or group from engaging in any lawful
political, social, cultural, or religious activities, constitutionally
protected speech, or, for political reasons, lawful business activities
that the supervisor disagrees with or disfavors.'' Some commenters
requested that this prohibition be expanded to cover all agency
personnel, not just supervisors. Similarly, another commenter suggested
that the prohibition should be extended to prohibit any attempt to
discourage lawful political or religious activity regardless of what
the supervisor thinks about the activity.
The Board did not intend this provision to be read so narrowly as
to only cover the views of supervisory staff as compared to the views
of other agency staff. In response to the concerns expressed by
commenters, and to ensure the agency's standards remain aligned with
those of other financial regulators, the NCUA is changing the wording
in the final rule to cover lawful political, social, cultural, or
religious activities, constitutionally protected speech, or, for
political reasons, lawful business activities that are disfavored by
the agency or any of its personnel. This wording is to clarify that it
does not matter whether the bias comes from the head of the agency or
from an individual examiner, the bias is not a permissible basis for
agency action.
The Definition of Reputation Risk
The Board proposed to define ``reputation risk'' as the risk,
regardless of how the risk is labeled by the
[[Page 38272]]
institution or by the agency, that an action or activity, or
combination of actions or activities, or lack of actions or activities,
of an institution could negatively impact public perception of the
institution for reasons unrelated to the current or future financial
and operational condition of the institution.\15\ The NCUA received
comments on whether the definition of ``reputation risk'' should
include the phrase ``operational'' in the phrase ``for reasons not
clearly and directly related to the financial condition of the
institution.'' Some commenters believed that the phrase could be used
to evade the intention of the rule to allow some consideration of
reputation risk, while others believe the proposed definition could
create supervisory blind spots.
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\15\ 90 FR 48411.
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Several commenters recommended that the proposed definition of
reputation risk be altered to remove the phrase ``for reasons not
clearly and directly related to the financial condition of the
institution.'' However, the agency believes this phrase is necessary to
maintain NCUA's ability to address public concerns that directly relate
to an institution's financial condition and solvency because those
concerns can lead to runs or losses to the Share Insurance Fund. Unlike
public concerns about an institution doing business with politically
controversial people or entities, concerns about an institution's
financial condition have been shown repeatedly to lead to a direct
negative impact on the institution that can cause failure.
The Board believes the NCUA's supervisory framework is
comprehensive without speculation on event-specific risks creating
safety and soundness issues. By removing reputation risk as a
subjective component of the examination, NCUA is focusing its exams on
objective risk factors, like financial indicators and trends and
compliance with laws and regulations. The Board acknowledges that
operational risk is a significant concern for institutions. Public
perception that a credit union could be susceptible to a breakdown in
the provision of services due to operational issues could have a direct
impact on members' willingness to do business with a credit union and
thus on the institution's financial solvency.
Acknowledging the comments received, and to ensure the agency's
standards remain aligned with those of other financial regulators, the
Board decided to add ``operational'' into the final rule such that the
definition of ``reputation risk'' will be ``any risk, regardless of how
the risk is labeled by the institution or regulators, that an action or
activity, or combination of actions or activities, or lack of actions
or activities, of an institution could negatively impact public
perception of the institution for reasons not clearly and directly
related to the financial or operational condition of the institution.''
The Definition of Adverse Action
``Adverse action,'' as defined by the proposed rule, included the
provision of negative feedback, including written feedback in a report
of examination, a document of resolution, oral feedback, or an
enforcement action. This definition would only apply to NCUA-initiated
adverse actions. NCUA will often jointly examine federally insured,
state-chartered credit unions (FISCUs) along with the state regulator.
In these instances, the state regulator generally will take the lead in
issuing the report of examination and any corrective action. If the
state regulator elects to examine for reputation risk, NCUA examiners
will not participate in these discussions or enforce any resulting
supervisory actions taken by the state regulator. A commenter noted the
need for close consultation and coordination with state-regulators in
order to minimize the burden to FISCUs and assure mutual understanding
of this rule's impact. The NCUA has communicated its prohibition on
examining for reputation risk and related concepts both publicly,
including with state supervisory authorities, and internally.\16\
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\16\ On September 25, 2025, the NCUA issued Letter to Credit
Unions 25-CU-05 wherein the agency notified supervised institutions
that it was ceasing to use reputation risk in the examination and
supervisory process. Elimination of Reputation Risk [verbar] NCUA.
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Furthermore, adverse action encompassed any NCUA-led action of any
agency employee, including any communication characterized as informal
or preliminary. A downgrade (or contribution to a downgrade) of any
supervisory rating, including a rating assigned under NCUA's CAMELS
ratings system,\17\ also would constitute an ``adverse action'' under
the proposed rule. Further, an approval or denial of a filing, or an
imposition of a discretionary supervisory action under prompt
corrective action, on the basis of ``reputation risk'' would constitute
an ``adverse action'' under the proposed rule, except where federal law
requires consideration of reputation-related criteria. This includes
any burdensome requirements placed on an approval, the introduction of
additional approval requirements, or any other heightened requirements
or emphasis on an activity or change.
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\17\ For additional information on NCUA's CAMELS rating system,
please see Letter to Credit Unions 22-CU-05
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The agency also included a general ``catch-all'' for any other
actions, including approval or denial of applications, waivers, and
other agency actions or decisions for any party, that could impact the
party. This catch-all is meant to include actions such as decisions on
applications for waivers, applications to engage in certain business
activities for which supervisory permission is required, or other
regulatory decisions affecting institutions. The Board adopts these
definitions without change.
The Definitions Regarding Associated Business Relationships
The Board proposed, ``doing business with'' in the rule to be
construed broadly and to include both business relationships with
credit union members, accountholders, and with third-party service
providers. It is also intended to include the relationship of an
institution with organizations or individuals that the institution is
providing with charitable donations or services. This term is intended
to include both existing business relationships and prospective
business relations. It is worth noting that one commenter suggested
clarifying that this prohibition applies to Credit Union Service
Organizations (CUSOs). The NCUA conducts reviews of CUSOs in accordance
with 12 CFR part 712.\18\ The Board believes the expanded definition of
reputation risk and prohibitions of 12 CFR 791.22 communicate that the
prohibition on the consideration of reputation risk applies to all
agency personnel and to the examination of their service providers.\19\
Thus, the intended scope of the rule is broad. However, to avoid doubt,
the Board
[[Page 38273]]
further clarifies that adverse actions against CUSOs on the basis of
reputation risk, and examination for or consideration of reputation
risk, as defined herein, are all prohibited for all agency personnel
and service providers. The term ``institution-affiliated party'' was
proposed to be identical with the definition at 12 U.S.C. 1786(r).
Commenters accepted this definition; however, several commented that a
distinction should be drawn between using the supervisory process to
conclude a reputation risk exists and a supervisor's expectation that a
credit union itself evaluates the potential for reputation risk and
make informed decisions as to how to manage those risks. One suggested
the NCUA continue to affirm credit unions must have the flexibility to
enter and exit relationships as their member-owners see fit. The Board
affirms that credit unions retain the ability to act as their member-
owners see fit, provided the person (or institution-affiliated party)
is not prohibited or the action doesn`t otherwise violate a law or
regulation, and adopts this definition without change.
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\18\ 12 CFR 712.3(d).
\19\ 12 CFR 712.1(d) (``As used in this part, CUSO means any
entity in which a FICU has an ownership interest or to which a FICU
has extended a loan, and that entity is engaged primarily in
providing products or services to credit unions or credit union
members, or, in the case of checking and currency services,
including cashing checks and money orders for a fee, and selling
negotiable checks, including travelers checks, money orders, and
other similar money transfer instruments (including international
and domestic electronic fund transfers and remittance transfers, as
defined in section 919 of the Electronic Fund Transfer Act, 15
U.S.C. 1693o-1), to persons eligible for membership in any credit
union having a loan, investment or contract with the entity. A CUSO
also includes any entity in which a CUSO has an ownership interest
of any amount, if that entity is engaged primarily in providing
products or services to credit unions or credit union members.'')
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Finally, as noted in the proposed rule, regulations codified in 12
CFR part 717 refer to reputation risk concerning certain identity theft
prevention programs required by the Fair and Accurate Credit
Transactions Act of 2003. However, by statute, guidelines and
regulations for these programs must occur jointly across certain
federal agencies, so no conforming amendment is being made for 12 CFR
part 717 at this time. Any changes will be addressed in a separate,
joint rulemaking in the future. Until that separate, joint rulemaking
occurs, the NCUA expects to exercise discretion in enforcing 12 CFR
part 717 by using agency resources to assess compliance without regard
to reputation risk.
IV. Final Rule
The Board believes the prohibitions included in this rulemaking are
comprehensive and as specified in this final rule, is making minor
modifications to the proposed definitions as referenced in the above
summary comment response. This final rule does not impose any
additional expectations or requirements on credit unions. This
rulemaking establishes an internal agency policy. The Board now
publishes this final rule to codify the elimination of reputation risk
from the NCUA's supervisory framework, having explained above the
regulatory text changes made in consideration of the public input
received following publication of the proposal on October 21, 2025.
V. Regulatory Procedures
A. Executive Orders 12866, 13563, and 14192
Pursuant to Executive Order 12866 (``Regulatory Planning and
Review''), a determination must be made whether a regulatory action is
significant and therefore subject to review by the Office of
Information and Regulatory Affairs (OIRA), within the Office of
Management and Budget (OMB) in accordance with the requirements of the
Executive Order.\20\ Executive Order 13563 (``Improving Regulation and
Regulatory Review'') supplements and reaffirms the principles,
structures, and definitions governing contemporary regulatory review
established in Executive Order 12866.\21\
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\20\ 58 FR 51735 (Oct. 4, 1993).
\21\ 76 FR 3821 (Jan. 21, 2011).
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Expected Effects
As previously discussed, to improve the efficiency and
effectiveness of the supervisory framework, the NCUA is establishing a
regulation codifying the removal of reputation risk from its
examination and supervision programs.
NCUA Regulated Entities Affected by the Rule
NCUA currently supervises 2,740 FCUs and 1,630 federally insured,
state-chartered credit unions (collectively referred to as FICUs). (16)
Because all FICUs are subject to supervision by NCUA, this rule affects
all 4,370 institutions.
Other Parties Affected by the Rule
Because the rule aims to remove the influence of the agency's
reputation risk assessments on institutions' member and business
relationships, NCUA concludes that the rule will potentially affect all
FICUs' current and future members and business partners. It will also
affect any other institutions over which the NCUA has or may be granted
supervisory authority.
Current Legal and Regulatory Baselines
On September 25, 2025, the NCUA issued Letter to Credit Unions 25-
CU-05 wherein the agency notified supervised institutions that it was
ceasing to use reputation risk in the examination and supervisory
process.\22\ The NCUA also sent a memo to staff on that same day,
instructing staff that they may no longer base supervisory concerns on
reputation risk. NCUA employees were notified that they may not refer
to or engage in discussions about reputation risk or similar concepts
as part of examinations and supervision contacts or other regulatory or
supervisory actions (such as waivers, application decisions, or
enforcement actions) for a credit union or credit union service
organization. The agency is in the process of removing reputation risk
from its regulations, policies, manuals, and training materials.
Therefore, the NCUA has already discontinued the use of reputation risk
in its supervision program as of September 25, 2025.
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\22\ Elimination of Reputation Risk [verbar] NCUA.
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This final rule creates a formal, legal mandate to remove
reputation risk from NCUA's supervision framework. Effectively, there
is no additional burden, and therefore no associated compliance costs.
Costs and Benefits
This regulation prohibiting the use of reputation risk in the
examination and supervision program removes uncertainty and the
potential for misuse, which inherently benefits FICUs. The removal of
reputation risk ensures greater consistency and objectivity in
supervisory decisions, increasing the predictability for regulated
institutions to understand and manage regulators' supervisory
expectations. The rule further benefits credit unions and their members
by formally eliminating actual or perceived reputation risk-related
regulatory restrictions and constraints on member services that would
otherwise be permissible.
Other than the inherent benefits described above, the NCUA cannot
quantify the number of institutions, or the associated costs, where an
institution was criticized for activities because of reputation risk.
Nor does the NCUA have the information necessary to quantify the number
of institutions that might make changes to their operations based on
this change.
Significance
This final rule was drafted and reviewed in accordance with
Executive Order 12866 and Executive Order 13563. OIRA, within the
Office of Management and Budget (OMB), has determined that this final
rule is a ``significant regulatory action'' as defined by section 3(f)
of Executive Order 12866. Executive Order 14192 (``Unleashing
Prosperity Through Deregulation'') requires that any new incremental
costs associated with new regulations shall, to the extent permitted by
law, be offset by the elimination of existing costs associated with at
least 10
[[Page 38274]]
prior regulations.\23\ This final rule is considered a deregulatory
action under Executive Order 14192.
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\23\ 90 FR 9065 (Feb. 6, 2025).
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B. Regulatory Flexibility Act
The Regulatory Flexibility Act \24\ generally requires an agency to
conduct a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements, unless the agency certifies that
the rule will not have a significant economic impact on a substantial
number of small entities. If the agency makes such a certification, it
shall publish the certification at the time of publication of either
the proposed rule or the final rule, along with a statement providing
the factual basis for such certification.\25\ For purposes of this
analysis, NCUA considers small credit unions to be those having under
$100 million in assets.\26\ The Board fully considered the potential
economic impacts of the regulatory amendments on small credit unions.
This final rule creates a formal, legal mandate to remove reputation
risk from NCUA's supervision framework. Effectively, there is no
additional burden, and therefore no associated compliance costs.
Accordingly, NCUA certifies the final rule will not have a significant
economic impact on a substantial number of small credit unions.
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\24\ 5 U.S.C. 601 et seq.
\25\ 5 U.S.C. 605(b).
\26\ 80 FR 57512 (Sept. 24, 2015).
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C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) generally provides that
an agency may not conduct or sponsor, and not withstanding any other
provision of law, a person is not required to respond to a collection
of information, unless it displays a currently valid OMB control
number. The PRA applies to rulemaking in which an agency creates a new
or amends existing information collection requirements. For purposes of
the PRA, an information collection requirement may take the form of a
reporting, recordkeeping, or a third-party disclosure requirement. As
stated in the proposal, the NCUA determined this rule does not create
any information collection or revise any existing collection of
information and invited comment on any PRA implications. Having not
received public comments to indicate otherwise, NCUA maintains that
there are no OMB Control Numbers that exist or require revision with
respect to this final rule that amends the Code of Federal Regulations.
D. Executive Order 13132 on Federalism
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests.\27\
NCUA, an agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order to adhere to fundamental federalism
principles. This rule will affect how NCUA examiners cite or use
certain risks in the supervisory process, including for federally
insured, state-chartered credit unions. But the rule will not constrain
how state regulators apply these same concepts or otherwise change the
relationship between NCUA and the state regulators. The rulemaking will
therefore not have direct effect on the states, the relationship
between the national government and the states, or on the distribution
of power and responsibilities among the various levels of government.
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\27\ 64 FR 43255 (Aug. 4, 1999).
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E. Assessment of Federal Regulations and Policies on Families
NCUA has determined that this final rule will not affect family
well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999.\28\ While the changes in
NCUA's supervision of institutions could expand access to services, the
effect would be indirect and not easily quantifiable.
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\28\ Public Law 105-277, 112 Stat. 2681 (1998).
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F. Congressional Review Act
Subtitle E of the Small Business Regulatory Enforcement Fairness
Act of 1996, also known as the Congressional Review Act (CRA) generally
provides for congressional review of agency rules.\29\ NCUA must submit
a report to Congress and the Comptroller General when it issues a final
rule, as defined by the CRA.\30\ An agency rule, in addition to being
subject to congressional oversight, may also be subject to a delayed
effective date if the rule is a ``major rule.'' The Office of
Information and Regulatory Affairs (OIRA), within the Office of
Management and Budget (OMB), has determined that this rule is not a
``major rule'' within the meaning of the relevant sections of the CRA.
Specifically, the rule will not (i) have an aggregate economic impact
greater than or equal to $100 million, (ii) produce an increase in
prices/costs for consumers or other industry stakeholders/regulators,
or (iii) adversely affect domestic competition or the ability of U.S.
enterprises to compete in foreign markets. NCUA also will file
appropriate reports with Congress and the Comptroller General so this
rule may be reviewed.
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\29\ 5 U.S.C. 801-808.
\30\ 5 U.S.C. 551; 5 U.S.C. 804(3).
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List of Subjects
12 CFR Part 702
Banks, banking, Credit unions, Reporting and recordkeeping
requirements.
12 CFR Part 791
Administrative practice and procedure, Credit unions, Sunshine Act.
By the National Credit Union Administration Board, this 23rd day
of June 2026.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons stated in the preamble, the NCUA Board amends 12
CFR parts 702 and 791 as follows:
PART 702--CAPITAL ADEQUACY
0
1. The authority citation for part 702 continues to read as follows:
Authority: 12 U.S.C. 1757(9), 1766(a), 1784(a), 1786(e), 1790d.
Sec. 702.304 [Amended]
0
2. In Sec. 702.304, amend paragraph (b)(2) by removing
``reputational,''.
PART 791--RULES OF NCUA BOARD PROCEDURE; PROMULGATION OF NCUA RULES
AND REGULATIONS; PUBLIC OBSERVATION OF NCUA
0
3. The authority citation for part 791 continues to read as follows:
Authority: 12 U.S.C. 1766, 1781, 1786, 1787, 1789, and 5 U.S.C.
552b.
0
4. The heading for part 791 is revised to read as set forth above.
0
5. Add subpart E to read as follows:
Subpart E--Prohibition on Use of Reputation Risk by NCUA
Sec. 791.22 Prohibitions.
(a) The NCUA will not criticize, formally or informally, or take
adverse action against an institution on the basis of reputation risk.
(b) The NCUA will not require, instruct, or encourage an
institution, or any employee of an institution, to:
(1) Refrain from contracting or doing business with a third party,
including an institution-affiliated party, on the basis of reputation
risk;
(2) Terminate a contract or discontinue doing business with a third
party, including an institution-affiliated party, on the basis of
reputation risk;
(3) Sign a contract or initiate doing business with a third party,
including an institution-affiliated party, on the basis of reputation
risk; or
[[Page 38275]]
(4) Modify the terms or conditions under which it contracts or does
business with a third party, including an institution-affiliated party,
on the basis of reputation risk.
(c) The NCUA will not require, instruct, or encourage an
institution, or any employee of an institution, to terminate a contract
with, discontinue doing business with, sign a contract with, initiate
doing business with, modify the terms under which it will do business
with a person or entity, or take any action or refrain from taking any
action on the basis of the person's or entity's political, social,
cultural, or religious views or beliefs, constitutionally protected
speech, or on the basis of the person or entity's involvement in
politically disfavored but lawful business activities based on
reputation risk.
(d) The prohibitions in paragraphs (a) through (c) of this section
apply only to actions taken on the bases described in paragraphs (a)
through (c), and the prohibition in paragraph (c) shall not apply with
respect to persons, entities, or jurisdictions sanctioned by the Office
of Foreign Assets Control.
(e) The prohibitions in paragraphs (a) through (c) of this section
apply only to actions taken on the bases described in paragraphs (a)
through (c), and the prohibition in paragraph (c) shall not apply with
respect to actions taken to comply with statutory or regulatory field
of membership requirements, administration of Community Development
Revolving Loan Fund activities, or any other application or decision
where Federal law mandates the NCUA to consider criteria such as
character and fitness or integrity.
(f) Nothing in this section shall restrict the NCUA's authority to
implement, administer, and enforce the provisions of subchapter II of
chapter 53 of title 31, United States Code.
(g) The NCUA will not take any supervisory action or other adverse
action against an institution, a group of institutions, or the
institution-affiliated parties of any institution that is designed to
punish, discourage, or encourage an individual or group from engaging
in any lawful political, social, cultural, or religious activities or
lawful business activities, constitutionally protected speech, or, for
political reasons, lawful business activities that are disfavored by
the agency or any of its personnel.
(h) The following definitions apply to this section:
(1) Adverse action includes:
(i) Any negative feedback delivered by or on behalf of the NCUA to
an institution, including in an NCUA-issued report of examination or a
formal or informal enforcement action;
(ii) A downgrade, or contribution to a downgrade, of any
supervisory rating, including, but not limited to:
(A) Any NCUA rating under the CAMELS ratings system; and
(B) Any NCUA rating under any other rating system;
(iii) A denial of a filing under any of the NCUA's regulations in
this chapter;
(iv) Inclusion of a condition on a share insurance application or
other approval;
(v) Imposition of additional approval requirements;
(vi) Any other heightened requirements on an activity or change;
(vii) Any reclassification of a well-capitalized federally insured
credit union or imposition of a discretionary supervisory action under
NCUA's prompt corrective action rules (12 CFR part 702); and
(viii) Any action that negatively impacts the institution, or an
institution-affiliated party, or treats the institution differently
than similarly situated peers.
(2) Doing business with means an institution:
(i) Providing any product or service, including account services;
(ii) Contracting with a third party for the third party to provide
a product or service;
(iii) Providing discounted or free products or services to
customers or third parties, including charitable activities;
(iv) Entering into, maintaining, modifying, or terminating an
employment relationship; or
(v) Any other similar business activity that involves an
institution's member or accountholder or a third party.
(3) Institution-affiliated party means the same as in section 206
of the Federal Credit Union Act (12 U.S.C. 1786(r)).
(4) Institution means an entity for which the NCUA makes or will
make supervisory determinations or other decisions, either solely or
jointly.
(5) Reputation risk means any risk, regardless of how the risk is
labeled by the credit union or regulators, that an action or activity,
or combination of actions or activities, or lack of actions or
activities, of a credit union could negatively impact public perception
of the credit union for reasons not clearly and directly related to the
financial or operational condition of the institution.
[FR Doc. 2026-12856 Filed 6-24-26; 8:45 am]
BILLING CODE 7535-01-P