Senate Republicans Push to End ‘Reputational Risk’ in Banking

The U.S. Senate Committee on Banking, Housing, and Urban Affairs announced on March 6 that Chairman Tim Scott (R-S.C.) is leading efforts to eliminate reputational risk as a factor in banking regulations through the Financial Integrity and Regulation Management (FIRM) Act.

The bill, backed by all Republican members of the committee, seeks to prevent federal banking agencies from using reputational risk to justify regulatory decisions—an issue Scott argues has been used to politically target lawful businesses.

“As Chairman of the Senate Banking Committee, I have made addressing debanking a top priority. This discriminatory and un-American practice should concern everyone … It’s clear that federal regulators have abused reputational risk by carrying out a political agenda against federally legal businesses.”

Scott asserts that the FIRM Act will put an end to debanking, ensuring financial institutions are not pressured to cut off services based on subjective reputational concerns.

Republican Senators Rally Against ‘Weaponized’ Banking Regulations

Several committee Republicans, including Senators Mike Crapo (R-Idaho), Mike Rounds (R-S.D.), and Thom Tillis (R-N.C.), joined Scott in criticizing regulators for overstepping their authority.

Scott has been a vocal critic of debanking, leading Senate Banking Committee hearings and investigations into cases where federal agencies allegedly pressured banks to sever ties with certain industries or clients.

During a recent Senate hearing, Scott challenged Federal Reserve Chair Jerome Powell, prompting Powell to commit to working with the committee on the issue.

The FIRM Act would:

✅ Eliminate reputational risk from regulatory supervision
✅ Prohibit federal agencies from enforcing policies based on reputational concerns
✅ Mandate regular reporting to Congress on compliance

Lummis: ‘Regulators’ Days of Unchecked Power Are Over’

Senator Cynthia Lummis (R-Wyo.) delivered a strong condemnation of banking regulators, accusing them of abusing their power to target industries based on political motivations.

“Federal banking agencies have brazenly abused their power, strangling legitimate businesses through politically motivated ‘reputational risk’ designations while hiding behind a façade of independence.”

Lummis argued that the FIRM Act will restore accountability and prevent unelected regulators from imposing personal agendas on the financial system.

“Americans deserve a transparent regulatory framework that fosters innovation in digital assets instead of smothering it with government overreach.”

Restoring Fairness in Financial Oversight

Other Senate Republicans, including Bill Hagerty (R-Tenn.) and Katie Britt (R-Ala.), echoed concerns that reputational risk has been used as a political weapon rather than an objective financial metric.

Senator Thom Tillis (R-N.C.) stated:

“The FIRM Act will stop this political weaponization and ensure regulators focus on real financial risks, not personal or political agendas.”

As debate over regulatory authority intensifies, Republican lawmakers are positioning the FIRM Act as a crucial step toward depoliticizing financial oversight and ensuring a level playing field for businesses across industries.