Metro Lex News

U.S. Congressmen Andy Barr from Kentucky's 6th District and Ritchie Torres from New York's 15th District have introduced the Financial Integrity and Regulation Management (FIRM) Act. This bipartisan legislation aims to prevent federal banking regulators from denying financial services to legal businesses and individuals based on "reputational risk."

The bill is a response to past practices where regulators pressured banks to cut off services to legitimate businesses due to political or social reasons instead of focusing on safety and soundness. Congressman Barr emphasized, “For too long, unelected regulators have used the vague and subjective concept of reputational risk to push political ideology under the guise of bank supervision.” He states that the FIRM Act will restore integrity to the financial regulatory system by protecting access to banking services.

Congressman Torres further added, "The FIRM Act is about restoring fairness and objectivity to our financial system. No lawful business should be denied banking services based on subjective intent or shifting political winds."

Chairman Tim Scott expressed gratitude towards Barr for his efforts and highlighted that the Trump administration had taken steps to end the use of reputational risk as a regulatory tool. "Debanking federally legal businesses and law-abiding citizens is un-American," Scott stated, “Fortunately, the Trump administration has taken action to end the use of this subjective tool.”

The Conference Chairwoman McClain also supported the act, saying, "Debanking is a dangerous trend that erodes trust in our financial system." Greg Baer, President and CEO of the Bank Policy Institute, stated that BPI supports the FIRM Act, calling it "an important first step in refocusing the federal banking agencies on assessing material financial risk."

Other industry endorsements include Rob Nichols from the American Bankers Association, Kevin Fromer from the Financial Services Forum, and Kristin Smith from the Blockchain Association. Johnny Whiteside of the National Pawnbrokers Association praised it as providing "greater regulatory clarity."

The FIRM Act mandates that federal banking agencies eliminate reputational risk in supervision considerations, with agencies required to report compliance to Congress within 180 days. It has corresponding legislation in the Senate, introduced by Chairman Tim Scott.