Senate Banking Committee Chairman Tim Scott (R-S.C.) has introduced the Financial Integrity and Regulation Management (FIRM) Act, a bill aimed at removing reputational risk as a component of federal supervision. The legislation seeks to address the issue of debanking and has garnered support from all Republican members of the Senate Banking Committee, as well as endorsements from key stakeholders in the financial services industry and organizations representing industries that have been affected by debanking.
Chairman Scott emphasized the importance of the legislation during an appearance on Fox Business's Mornings with Maria. He stated, "Eliminating reputational risk is the way we allow our banks to make decisions on credit worthiness, not on fear of America’s regulators...what a regulator is able to do with reputational risk is to say that the institution may lose market cap because their banking industries that may cause reputation – loss of their positive reputation – in the marketplace."
The Wall Street Journal reported that Senator Scott's bill aims to end regulatory oversight of reputational risks, which he believes contributes to discrimination against certain clients. American Banker noted that while the FIRM Act targets subjective factors like reputational risk, it would not affect quantitative supervisory measures such as concentration or liquidity risks.
Politico highlighted that debanking has been a significant issue this Congress, particularly for Scott's committee agenda. The Bank Policy Institute supports the FIRM Act, with its president and CEO Greg Baer stating it is "an important step toward restoring fairness and integrity in how regulators oversee the banking industry."
The Hill pointed out Republicans' longstanding concerns about debanking since "Operation Choke Point," an initiative from the Obama administration discouraging banks from working with certain high-risk businesses. CoinDesk mentioned that digital asset businesses have faced challenges due to perceptions among regulators leading them away from these clients.
Axios reported broad support for Scott's bill among state finance officials. A letter signed by 26 state officials expressed concern over what they termed discriminatory practices against lawful yet disfavored customers.