WASHINGTON, D.C. – U.S. Senator Katie Britt (R-Ala.) and Senate Banking Committee Chairman Tim Scott (R-S.C.), alongside all Republican members of the Banking Committee, have introduced the Financial Integrity and Regulation Management (FIRM) Act. The proposed legislation seeks to eliminate the use of reputational risk as a factor in determining the safety and soundness of regulated financial institutions.
The bill addresses concerns surrounding the practice of “debanking,” in which financial institutions deny services to individuals or businesses due to perceived reputational risks. Supporters argue that such practices allow financial regulators to apply subjective oversight, potentially restricting access to banking services based on political or ideological considerations.
“The practice of debanking is preventing people from accessing their American Dream,” said Senator Britt. “I’m proud to support legislation that would shield our banking system from subjective oversight and political agendas. Along with my colleagues, we will end this financial exploitation and ensure law-abiding citizens and businesses have access to financial services.”
If enacted, the FIRM Act would eliminate federal banking agencies’ ability to implement new rules or guidance that incorporate reputational risk into their supervisory or regulatory oversight. Additionally, the legislation would require federal banking agencies to submit a report to Congress outlining their efforts to remove reputational risk considerations from the supervision of depository institutions.
Chairman Scott emphasized his concerns about financial regulators’ use of reputational risk, stating, “As Chairman of the Senate Banking Committee, I have made addressing debanking a top priority. 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.”
The legislation has garnered support from several industry groups, including the American Bankers Association, the Bank Policy Institute, the Financial Services Forum, the Blockchain Association, and the Online Lenders Alliance.
During a recent Senate Banking Committee hearing, Senator Britt reiterated her stance on the issue, stating, “It is no secret that our financial regulators have become increasingly politicized over the last four years. When you’re prioritizing a social agenda or a political one, instead of actually ensuring that people have an opportunity and access to the American Dream, we’ve got to call that for what it is.”
Britt also voiced her intent to further investigate instances of debanking and assess whether certain industries or groups have been disproportionately affected. She is also a cosponsor of Senator Kevin Cramer’s (R-N.Dak.) Fair Access to Banking Act, which aims to ensure banks provide services fairly and operate within safe and sound financial practices.
The FIRM Act represents an effort by Republican lawmakers to redefine the role of financial regulators and limit the scope of reputational risk in banking oversight. As the bill progresses, it is expected to spark debate on the balance between regulatory discretion and financial institutions’ ability to assess risk factors in their business decisions.
