[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 875 Reported in Senate (RS)]
<DOC>
Calendar No. 32
119th CONGRESS
1st Session
S. 875
To curtail the political weaponization of Federal banking agencies by
eliminating reputational risk as a component of the supervision of
depository institutions.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 6, 2025
Mr. Scott of South Carolina (for himself, Mr. Crapo, Mr. Rounds, Mr.
Tillis, Mr. Kennedy, Mr. Hagerty, Ms. Lummis, Mrs. Britt, Mr. Ricketts,
Mr. Cramer, Mr. Moreno, Mr. McCormick, and Mr. Banks) introduced the
following bill; which was read twice and referred to the Committee on
Banking, Housing, and Urban Affairs
March 18, 2025
Reported under authority of the order of the Senate of March 14, 2025,
by Mr. Scott of South Carolina, with an amendment
[Strike out all after the enacting clause and insert the part printed
in italic]
_______________________________________________________________________
A BILL
To curtail the political weaponization of Federal banking agencies by
eliminating reputational risk as a component of the supervision of
depository institutions.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
<DELETED>SECTION 1. SHORT TITLE.</DELETED>
<DELETED> This Act may be cited as the ``Financial Integrity and
Regulation Management Act'' or the ``FIRM Act''.</DELETED>
<DELETED>SEC. 2. FINDINGS; PURPOSES.</DELETED>
<DELETED> (a) Findings.--Congress finds that--</DELETED>
<DELETED> (1) the primary objective of financial regulation
and supervision by the Federal banking agencies is to promote
safety and soundness of depository institutions;</DELETED>
<DELETED> (2) all federally legal businesses and law-abiding
citizens regardless of political ideology should have equal
opportunity to obtain financial services and should not face
unlawful discrimination in obtaining such services;</DELETED>
<DELETED> (3) financial service providers are private
entities entitled to provide services to whichever customers
they so choose, provided that those decisions do not violate
the law;</DELETED>
<DELETED> (4) financial service providers should strive to
ensure that all business decisions are based on factors free
from unlawful prejudice or political influence;</DELETED>
<DELETED> (5) the use of reputational risk in supervisory
frameworks encourages Federal banking agencies to regulate
depository institutions based on the subjective view of
negative publicity and provides cover for the agencies to
implement their own political agenda unrelated to the safety
and soundness of a depository institution;</DELETED>
<DELETED> (6) Federal banking agencies have in fact used
reputational risk to limit access of federally legal businesses
and law-abiding citizens to financial services in 2018 when the
Federal Deposit Insurance Corporation acknowledged that the
agency used reputational risk reviews to limit access to
financial services by certain industries, commonly known as
``Operation Choke Point'';</DELETED>
<DELETED> (7) reputational risk does not appear in any
statute and is an unnecessary and improper use of supervisory
authority that does not contribute to the safety and soundness
of the financial system.</DELETED>
<DELETED>SEC. 3. DEFINITIONS.</DELETED>
<DELETED> In this Act:</DELETED>
<DELETED> (1) Depository institution.--The term ``depository
institution''--</DELETED>
<DELETED> (A) has the meaning given the term in
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813); and</DELETED>
<DELETED> (B) includes an insured credit
union.</DELETED>
<DELETED> (2) Federal banking agency.--The term ``Federal
banking agency''--</DELETED>
<DELETED> (A) has the meaning given the term in
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813); and</DELETED>
<DELETED> (B) includes--</DELETED>
<DELETED> (i) the National Credit Union
Administration; and</DELETED>
<DELETED> (ii) the Bureau of Consumer
Financial Protection.</DELETED>
<DELETED> (3) Insured credit union.--The term ``insured
credit union'' has the meaning given the term in section 101 of
the Federal Credit Union Act (12 U.S.C. 1752).</DELETED>
<DELETED> (4) Reputational risk.--The term ``reputational
risk'' means the potential that negative publicity or negative
public opinion regarding an institution's business practices,
whether true or not, will cause a decline in confidence in the
institution or a decline in the customer base, costly
litigation, or revenue reductions or otherwise adversely impact
the depository institution.</DELETED>
<DELETED>SEC. 4. REMOVAL OF REPUTATIONAL RISK AS A CONSIDERATION IN THE
SUPERVISION OF DEPOSITORY INSTITUTIONS.</DELETED>
<DELETED> Each Federal banking agency shall remove from any
guidance, rule, examination manual, or similar document established by
the agency any reference to reputational risk, or any term
substantially similar, regarding the supervision of depository
institutions such that reputational risk, or any term substantially
similar, is no longer taken into consideration by the Federal banking
agency when examining and supervising a depository
institution.</DELETED>
<DELETED>SEC. 5. PROHIBITION.</DELETED>
<DELETED> No Federal banking agency may engage in any activity
concerning or related to the regulation, supervision, or examination,
of the reputational risk, or any term substantially similar, or the
management thereof, of a depository institution, including--</DELETED>
<DELETED> (1) establishing any rule, regulation,
requirement, standard, or supervisory expectation concerning or
related to the reputational risk, or any term substantially
similar, or the management thereof, of a depository institution
whether binding or not;</DELETED>
<DELETED> (2) conducting any examination, assessment, data
collection, or other supervisory exercise concerning or related
to reputational risk, or any term substantially similar, or the
management thereof, of a depository institution;</DELETED>
<DELETED> (3) issuing any examination finding, supervisory
criticism, or other supervisory or examination communication
concerning or related to reputational risk, or any term
substantially similar, or the management thereof, of a
depository institution;</DELETED>
<DELETED> (4) making any supervisory ratings decision or
determination that is based, in whole or in part, on any matter
concerning or related to reputational risk, or any term
substantially similar, or the management thereof, of a
depository institution; and</DELETED>
<DELETED> (5) taking any formal or informal enforcement
action that is based, in whole or in part, on any matter
concerning or related to reputational risk, or any term
substantially similar, or the management thereof, of a
depository institution.</DELETED>
<DELETED>SEC. 6. REPORTS.</DELETED>
<DELETED> Not later than 180 days after the date of enactment of
this Act, each Federal banking agency shall submit to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives a report that--
</DELETED>
<DELETED> (1) confirms implementation of this Act;
and</DELETED>
<DELETED> (2) describes any changes made to internal
policies as a result of this Act.</DELETED>
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Financial Integrity and Regulation
Management Act'' or the ``FIRM Act''.
SEC. 2. FINDINGS.
Congress finds that--
(1) the primary objective of financial regulation and
supervision by the Federal banking agencies is to promote the
safety and soundness of depository institutions;
(2) all federally legal businesses and law-abiding citizens
regardless of political ideology should have equal opportunity
to obtain financial services and should not face unlawful
discrimination in obtaining such services;
(3) financial service providers are private entities
entitled to provide services to whichever customers they so
choose, provided that those decisions do not violate the law;
(4) financial service providers should strive to ensure
that all business decisions are based on factors free from
unlawful prejudice or political influence;
(5) the use of reputational risk in supervisory frameworks
encourages Federal banking agencies to regulate depository
institutions based on the subjective view of negative publicity
and provides cover for the agencies to implement their own
political agenda unrelated to the safety and soundness of a
depository institution;
(6) Federal banking agencies have in fact used reputational
risk to limit access of federally legal businesses and law-
abiding citizens to financial services in 2018 when the Federal
Deposit Insurance Corporation acknowledged that the agency used
reputational risk reviews to limit access to financial services
by certain industries, commonly known as ``Operation Choke
Point''; and
(7) reputational risk does not appear in any statute and is
an unnecessary and improper use of supervisory authority that
does not contribute to the safety and soundness of the
financial system.
SEC. 3. DEFINITIONS.
In this Act:
(1) Depository institution.--The term ``depository
institution''--
(A) has the meaning given the term in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813); and
(B) includes an insured credit union.
(2) Federal banking agency.--The term ``Federal banking
agency''--
(A) has the meaning given the term in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813); and
(B) includes--
(i) the National Credit Union
Administration; and
(ii) the Bureau of Consumer Financial
Protection.
(3) Insured credit union.--The term ``insured credit
union'' has the meaning given the term in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752).
(4) Reputational risk.--The term ``reputational risk''
means the potential that negative publicity or negative public
opinion regarding an institution's business practices, whether
true or not, will cause a decline in confidence in the
institution or a decline in the customer base, costly
litigation, or revenue reductions or otherwise adversely impact
the depository institution.
SEC. 4. REMOVAL OF REPUTATIONAL RISK AS A CONSIDERATION IN THE
SUPERVISION OF DEPOSITORY INSTITUTIONS.
Each Federal banking agency shall remove from any guidance, rule,
examination manual, or similar document established by the agency any
reference to reputational risk, or any term substantially similar,
regarding the supervision of depository institutions such that
reputational risk, or any term substantially similar, is no longer
taken into consideration by the Federal banking agency when examining
and supervising a depository institution.
SEC. 5. PROHIBITION.
No Federal banking agency may engage in any activity concerning or
related to the regulation, supervision, or examination, of the
reputational risk, or any term substantially similar, or the management
thereof, of a depository institution, including by--
(1) establishing any rule, regulation, requirement,
standard, or supervisory expectation concerning or related to
the reputational risk, or any term substantially similar, or
the management thereof, of a depository institution whether
binding or not;
(2) conducting any examination, assessment, data
collection, or other supervisory exercise concerning or related
to reputational risk, or any term substantially similar, or the
management thereof, of a depository institution;
(3) issuing any examination finding, supervisory criticism,
or other supervisory or examination communication concerning or
related to reputational risk, or any term substantially
similar, or the management thereof, of a depository
institution;
(4) making any supervisory ratings decision or
determination that is based, in whole or in part, on any matter
concerning or related to reputational risk, or any term
substantially similar, or the management thereof, of a
depository institution; and
(5) taking any formal or informal enforcement action that
is based, in whole or in part, on any matter concerning or
related to reputational risk, or any term substantially
similar, or the management thereof, of a depository
institution.
SEC. 6. TAKING ACCOUNT OF INSTITUTIONS WITH LOW OPERATIONAL RISK.
(a) Tailoring Regulation to Business Model and Risk.--
(1) Definitions.--In this subsection--
(A) the term ``Federal financial institutions
regulatory agency'' means the Office of the Comptroller
of the Currency, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance
Corporation, the National Credit Union Administration,
and the Bureau of Consumer Financial Protection; and
(B) the term ``regulatory action''--
(i) means any proposed, interim, or final
rule or regulation; and
(ii) does not include any action taken by a
Federal financial institutions regulatory
agency that is solely applicable to an
individual institution, including an
enforcement action or order.
(2) Consideration and tailoring.--For any regulatory action
occurring after the date of enactment of this Act, each Federal
financial institutions regulatory agency shall--
(A) take into consideration the risk profile and
business models of each type of institution or class of
institutions subject to the regulatory action; and
(B) tailor the regulatory action applicable to an
institution, or type of institution, in a manner that
limits the regulatory impact, including cost, human
resource allocation, and other burdens, on the
institution or type of institution as is appropriate
for the risk profile and business model involved.
(3) Factors to consider.--In carrying out the requirements
of paragraph (2), each Federal financial institutions
regulatory agency shall consider--
(A) the aggregate impact of all applicable
regulatory actions on the ability of institutions to
flexibly serve their customers and local markets after
the date of enactment of this Act;
(B) the potential impact that efforts to implement
the applicable regulatory action and third-party
service provider actions may work to undercut efforts
to tailor the regulatory action described in paragraph
(2)(B); and
(C) the statutory provision authorizing the
applicable regulatory action, the congressional intent
with respect to the statutory provision, and the
underlying policy objectives of the regulatory action.
(4) Notice of proposed and final rulemaking.--Each Federal
financial institutions regulatory agency shall disclose and
document in every notice of proposed rulemaking and in every
final rulemaking for a regulatory action how the agency has
applied paragraphs (2) and (3).
(5) Limited look-back application.--
(A) In general.--Each Federal financial
institutions regulatory agency shall--
(i) conduct a review of all regulations
issued in final form pursuant to statutes
enacted during the period beginning on the date
that is 7 years before the date on which this
Act is introduced in the Senate and ending on
the date of enactment of this Act; and
(ii) apply the requirements of this
subsection to the regulations described in
clause (i).
(B) Revision.--Any regulation revised under
subparagraph (A) shall be revised not later than 3
years after the date of enactment of this Act.
(6) Reports to congress.--Not later than 1 year after the
date of enactment of this Act, and annually thereafter, each
Federal financial institutions regulatory agency shall submit
to the Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Financial Services of the House of
Representatives a report on the specific actions taken to
tailor the regulatory actions of the Federal financial
institutions regulatory agency pursuant to the requirements of
this subsection.
(b) Short-form Call Reports for All Banks Eligible for the
Community Bank Leverage Ratio.--The appropriate Federal banking
agencies, as defined in section 3 of the Federal Deposit Insurance Act
(12 U.S.C. 1813), shall promulgate regulations establishing a reduced
reporting requirement for all banks eligible for the Community Bank
Leverage Ratio, as defined in section 201(a) of the Economic Growth,
Regulatory Relief, and Consumer Protection Act (12 U.S.C. 5371 note),
when making the first and third report of condition of a year, as
required by section 7(a) of the Federal Deposit Insurance Act (12
U.S.C. 1817(a)).
(c) Report to Congress on Modernization of Supervision.--Not later
than 18 months after the date of enactment of this Act, the appropriate
Federal banking agencies, as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813), in consultation with State bank
supervisors, shall submit to the Committee on Banking, Housing, and
Urban Affairs of the Senate and the Committee on Financial Services of
the House of Representatives a report on the modernization of bank
supervision, including the following factors:
(1) Changing bank business models.
(2) Examiner workforce and training.
(3) The structure of supervisory activities within banking
agencies.
(4) Improving bank-supervisor communication and
collaboration.
(5) The use of supervisory technology.
(6) Supervisory factors uniquely applicable to community
banks.
(7) Changes in statutes necessary to achieve more effective
supervision.
SEC. 7. REPORTS.
Not later than 180 days after the date of enactment of this Act,
each Federal banking agency shall submit to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on Financial
Services of the House of Representatives a report that--
(1) confirms implementation of this Act; and
(2) describes any changes made to internal policies as a
result of this Act.
Calendar No. 32
119th CONGRESS
1st Session
S. 875
_______________________________________________________________________
A BILL
To curtail the political weaponization of Federal banking agencies by
eliminating reputational risk as a component of the supervision of
depository institutions.
_______________________________________________________________________
March 18, 2025
Reported with an amendment