People without a cryptographic background may not be aware that this is even worse than how it sounds. SHA-256 is a cryptographic hash function. It's a good cr

People without a cryptographic background may not be aware that this is even worse than how it sounds. SHA-256 is a cryptographic hash function. It's a good cryptographic hash function. But it's not a password hash function. They have different goals. Particularly a cryptographic hash is trying to be fast, while a password hash is trying to be slow. You can use a cryptographic hash function as a password hash, it's better than nothing. But it's a really poor choice. If this story happened as it's told, it not only means that compliance is making wrong decisions, it also means the auditor didn't know what he was talking about. There are FIPS-approved password hashes, even ones building upon SHA256 (PBKDF2-SHA2-256). It would've been less bad to propose to move from bcrypt to such a function. (Still not really justified, as bcrypt is a fine password hash function.)