March 06, 2025

Scott Leads Effort to Combat Debanking

Chairman Scott’s bill would remove reputational risk as a measure to determine the safety and soundness of regulated financial institutions.

Washington, D.C. – Building on his commitment to address debanking, Chairman Tim Scott (R-S.C.), is leading his fellow Banking Committee Republicans in introducing legislation to curtail the weaponization of federal banking agencies by eliminating the ability for regulators to use reputational risk as a component of supervision. Chairman Scott’s Financial Integrity and Regulation Management Act will eliminate all references to reputational risk as a measure to determine the safety and soundness of regulated financial institutions.

All Banking Committee Republicans, including Senators Mike Crapo (R-Idaho), Mike Rounds (R-S.D.), Thom Tillis (R-N.C.), John Kennedy (R-La.), Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), Katie Britt (R-Ala.), Pete Ricketts (R-Neb.), Jim Banks (R-Ind.), Kevin Cramer (R-N.D.), Bernie Moreno (R-Ohio), and Dave McCormick (R-Pa.), joined the Chairman on the legislation.

“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,” said Chairman Scott.

“The use of ‘reputational risk’ as a metric for supervisory ratings of financial institutions is nothing but another creative method for federal financial regulators to weaponize their power against politically disfavored groups. This disturbing trend is beyond the scope of law and must end immediately,” said Senator Crapo.

“Federal regulators have weaponized the concept of ‘reputational risk’ to banks by targeting individuals and organizations that they view as unbankable when making decisions on financial institutions,” said Senator Rounds. “This is an abuse of federal power to divert services from those with which they may not agree. Our legislation would ban regulators from using reputational risk when determining the supervisory rating of financial institutions.”

“Financial regulators have used 'reputational risk' to target people and businesses they don’t like, hiding behind this open-ended and subjective concept,” said Senator Tillis. “The FIRM Act stops this political weaponization and ensures regulators focus on real financial risks, not personal or political agendas. It’s past time to hold these agencies accountable and restore fairness to our banking system.”

“Too often, financial regulators discriminate against customers and debank individuals because they disagree with their politics. I’m proud to help introduce the FIRM Act to protect law-abiding Americans from rogue regulators with a biased agenda,” said Senator Kennedy.

"Federal banking agencies have brazenly abused their power, strangling legitimate businesses through politically motivated 'reputational risk' designations while hiding behind a façade of independence. The FIRM Act strips away their ability to play politics with our financial system and finally holds these unelected bureaucrats accountable. Americans deserve a transparent regulatory framework that fosters innovation in digital assets instead of smothering it with government overreach. We're putting these rogue regulators on notice—their days of unchecked power are over," said Senator Lummis.

"The practice of debanking is literally preventing people from accessing the American Dream. 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," said Senator Britt. 

“The FIRM Act peels back Biden- and Obama-era tactics that weaponized regulators across government agencies. These agencies go beyond their congressional mandates to debank specific industries and push their political agenda. I’m grateful to Chairman Scott for leading on this important legislation,” said Senator Ricketts.

"Under Joe Biden, extreme liberal bureaucrats weaponized their power to discriminate against political opponents under the guise of reputational risk,” said Senator Moreno. “I’m proud to join Chairman Scott on this legislation to rein in the ability of federal banking agencies to implement new, burdensome regulations and engage in predatory supervision.”

“Bank regulators under the previous Administration weaponized the idea of reputation risk to drive financial institutions away from certain activities,” said Senator McCormick. “I’m proud to join Chairman Scott’s FIRM Act to depoliticize the banking regulators and refocus examinations on material risks to safety and soundness.”

BACKGROUND:

In his first legislative hearing of the year, Chairman Scott hosted witnesses who shared firsthand their experiences being debanked. At the hearing, Chairman Scott called out the Biden administration’s financial regulators who exploited their power and pressured financial institutions to cut off services to individuals and businesses and pledged that the committee will work to find solutions to address this issue.

During the committee’s hearing with Federal Reserve Chair Jerome Powell, Chairman Scott again highlighted the issue of debanking federally legal businesses and law-abiding citizens, and Chair Powell committed to working with the committee to end this practice.

Chairman Scott also led a roundtable discussion with Senate Banking Republicans and leaders from the nation’s largest consumer banks focused on debanking and other regulatory issues facing the financial institutions.

The Financial Integrity and Regulation Management Act will:

  • Eliminate all references to reputational risk as a measure to determine the safety and soundness of regulated depository institutions. 
  • Eliminate the Federal banking agencies’ ability to promulgate new rules or guidance that use reputational risk to supervise or regulate depository institutions.
  • Require the Federal banking agencies to report to Congress on their elimination of reputational risk as a component of the supervision of depository institutions.

For a one-pager on the bill, click here. For bill text, click here.

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