HR2702-119

What This Bill Does

The FIRM Act responds to concerns that federal banking regulators have used reputational risk to pressure banks away from lawful but politically controversial customers, including the Operation Choke Point example cited in the findings. The bill defines federal banking agency to include the FDIC Act agencies, the National Credit Union Administration, and the Consumer Financial Protection Bureau, and defines reputational risk as risk from negative publicity or public opinion, while excluding certain unlawful transactions involving state sponsors of terrorism or foreign terrorist organizations in the reported version. It requires each federal banking agency to remove reputational-risk references from guidance, rules, examination manuals, and similar documents. It then prohibits agencies from regulating, supervising, examining, rating, criticizing, collecting data, or taking enforcement action based on reputational risk or similar terms. Agencies must report implementation to Senate Banking and House Financial Services within 180 days.

Who Benefits and How

Banks subject to examination benefit because regulators may no longer use reputational risk as a supervisory criterion. Insured credit unions benefit because the National Credit Union Administration is covered. Federally legal businesses denied banking services benefit from reduced regulatory pressure on banks to cut ties based on subjective reputation concerns. Firearms businesses, cryptocurrency businesses, payday lenders, and energy companies benefit if banks face less supervisory pressure to avoid those sectors. Depository institutions serving controversial but lawful customers benefit from clearer limits on supervisory criticism and enforcement.

Who Bears the Burden and How

Federal banking regulators must remove reputational-risk materials from guidance, rules, manuals, and supervisory documents. The Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, and Consumer Financial Protection Bureau lose a supervisory tool. House Financial Services and Senate Banking receive implementation reports. Consumer advocates may lose regulatory leverage to pressure banks away from harmful but lawful industries. Banking examiners must adjust exams, ratings, communications, and enforcement practices to avoid reputational-risk reasoning.

Key Provisions

• Defines reputational risk as risk from negative publicity or public opinion while excluding specified unlawful terrorism-related transactions.
• Requires each Federal banking agency to remove reputational-risk references from guidance, rules, examination manuals, and similar documents.
• Prohibits Federal banking agencies from examining, rating, criticizing, collecting data, or taking enforcement action based on reputational risk.
• Bars use of substantially similar terms that would recreate reputational-risk supervision under another label.
• Requires each covered agency to report implementation and internal-policy changes to Senate Banking and House Financial Services within 180 days.