U.S. Sen. Tim Scott (R-SC) introduced legislation that would eliminate the ability for federal banking regulators to use reputational risk as a component of supervision.
The Financial Integrity and Regulation Management Act (S.875) would, in fact, eliminate all references to reputational risk as a measure to determine the safety and soundness of regulated financial institutions.
“This discriminatory and un-American practice should concern everyone, which is why I’ve led my colleagues in working to find tangible solutions. It’s clear that federal regulators have abused reputational risk by carrying out a political agenda against federally legal businesses. This legislation, which eliminates all references to reputational risk in regulatory supervision, is the first step in ending debanking once and for all,” Scott, chair of the Senate Banking Committee, said.
Specifically, the Financial Integrity and Regulation Management Act would eliminate all references to reputational risk as a measure to determine the safety and soundness of regulated depository institutions. It would also eliminate the Federal banking agencies’ ability to promulgate new rules or guidance that use reputational risk to supervise or regulate depository institutions. Finally, it would require the Federal banking agencies to report to Congress on their elimination of reputational risk as a component of the supervision of depository institutions.
The bill was cosponsored by all the Republican members of the Senate Banking Committee, including Sens. Mike Crapo (R-ID), Mike Rounds (R-SD), Thom Tillis (R-NC), John Kennedy (R-LA), Bill Hagerty (R-TN), Cynthia Lummis (R-WY), Katie Britt (R-AL), Pete Ricketts (R-NE), Jim Banks (R-IN), Kevin Cramer (R-ND), Bernie Moreno (R-OH), and Dave McCormick (R-PA).
“Financial regulators have used ‘reputational risk’ to target people and businesses they don’t like, hiding behind this open-ended and subjective concept,” Tillis said. “The FIRM Act stops this political weaponization and ensures regulators focus on real financial risks, not personal or political agendas. It’s past time to hold these agencies accountable and restore fairness to our banking system.”