Committee approves FIRM Act to remove ‘reputational risk’ from supervision language

Committee advances bill to exclude reputational risk from supervisory guidance.

Representative Andy Barr introduced HR 2702, the Financial Integrity and Regulation Management Act (FIRM Act), which would remove references to “reputational risk” from federal banking agencies’ supervisory guidance. Barr described the bill as bipartisan and said it would “ensure that bank supervision remains focused on clear objective criteria” and would prevent regulators from using reputational risk to influence banks’ customer decisions.

Representative Ritchie Torres, a cosponsor, said access to banking is an essential economic liberty and that “If you are a law abiding family or business, you should never be debanked unless the decision is based on objective, quantifiable risk.” Supporters argued the bill would limit politicized debanking and protect lawful businesses.

Opponents, led by Representative Maxine Waters, said HR 2702 would tie regulators’ hands. Waters warned that eliminating reputational risk as a supervisory component could prevent regulators from responding to factors that materially affect bank stability, and she cited past bank failures as evidence that perception and confidence matter to stability.

The committee adopted an amendment clarifying treatment in terrorism-related circumstances (Sherman amendment) and ordered the bill favorably reported to the House. The recorded committee vote on ordering HR 2702 as amended was 33 ayes and 19 nays.