The Senate Banking Committee today voted 13-11 in favor of legislation to prevent federal banking regulators from using reputational risk as a component in supervision. The bill passed along party lines, with Republicans voting in favor of the legislation and Democrats voting against it.
The Financial Integrity and Regulation Management, or FIRM, Act [S.875] would eliminate all references to reputational risk as a measure to determine the safety and soundness of regulated financial institutions, according to a summary of the bill by lead sponsor committee Chairman Tim Scott (R-S.C.). The legislation would prohibit banking agencies, the Consumer Financial Protection Bureau and National Credit Union Administration from implementing subjective oversight akin to “Operation Chokepoint” in the future.
The American Bankers Association supports the FIRM Act and submitted comments in favor of the bill, saying that banks seek to provide financial services to as many individuals and businesses as possible.
“We congratulate Chairman Scott on the Senate Banking Committee’s vote to advance the FIRM Act, which restores banks’ flexibility to serve their customers, clients and communities without political interference and ensures that legal businesses can find a bank that meets their needs,” ABA President and CEO Rob Nichols said after the vote. “This commonsense legislation reinforces that access to banking services should be determined by the free market and prudent risk management, not the personal perspectives of regulators.”
