Senate Banking Committee Chairman Tim Scott (R-S.C.) and committee’s Republican members today introduced legislation to prevent federal banking regulators from using reputational risk as a component in supervision.
The Financial Integrity and Regulation Management, or FIRM, Act would eliminate all references to reputational risk as a measure to determine the safety and soundness of regulated financial institutions, according to Scott. The senator said the legislation was necessary to prevent regulators from pressuring financial institutions to engage in alleged debanking.
“This discriminatory and un-American practice should concern everyone, which is why I’ve led my colleagues in working to find tangible solutions,” Scott said. “It’s clear that federal regulators have abused reputational risk by carrying out a political agenda against federally legal businesses.”
In a statement, American Bankers Association President and CEO Rob Nichols said banks are in the business of providing financial services to as many individuals and businesses as possible.
“The FIRM Act restores banks’ freedom to make their own decisions about who they can and cannot bank by limiting regulators’ ability to use subjective concerns about ‘reputational risk’ to pressure financial institutions not to bank certain customers,” Nichols said. “We thank Chairman Scott for his leadership in advancing this commonsense legislation reinforcing that access to banking services should be determined by prudent risk management at banks and not the personal perspective of regulators.”
