On March 6, 2025, Chairman Tim Scott (R-S.C.) introduced the Financial Integrity and Regulation Management (FIRM) Act, a pivotal piece of legislation poised to eliminate the use of reputational risk in regulatory supervision. By enacting this legislation, the FIRM Act intends to prevent regulators from discriminating against federally legal businesses and put an end to the practice of debanking, which has adversely affected numerous industries. This initiative has garnered substantial support from prominent stakeholders within the financial services sector and organizations representing industries impacted by debanking.
Widespread Industry Support
Endorsements from Major Financial Entities
The introduction of the FIRM Act has received robust backing from distinguished financial organizations such as the American Bankers Association, the Bank Policy Institute, and the Financial Services Forum. The American Bankers Association has emphasized that this legislation will restore banks’ autonomy to choose their clientele based on objective assessments rather than undue regulatory pressure related to reputational risk. By allowing banks the freedom to make independent decisions, the Act aims to fortify the principle of independent financial judgment.
Similarly, the Bank Policy Institute has voiced its support for the FIRM Act by highlighting the benefits of refocusing regulatory oversight on the financial conditions and legal compliance of banks. The Institute underlines that the legislation will eliminate the subjective nature of business judgments that currently influence regulatory pressure, promoting a more predictable and stable regulatory environment. This redirection aims to shield banks from the vagaries of reputation-based supervision and enable them to operate more confidently within a legally compliant framework.
Advocacy from the Financial Services Forum and Blockchain Association
The Financial Services Forum has praised the FIRM Act for fostering a predictable regulatory atmosphere, crucial for banks to function effectively within a secure financial system. The Forum asserts that the elimination of reputational risk from regulatory considerations will lead to more consistent and reliable banking services. By ensuring that regulatory practices are grounded in financial risk assessments rather than subjective evaluations, the legislation is expected to enhance the overall stability of the financial sector.
Additionally, the Blockchain Association, which represents the burgeoning digital assets industry, has welcomed the FIRM Act as a solution to the prevailing issue of targeted debanking. The association points out that debanking within the digital assets sector undermines innovation and financial inclusion. By removing reputational risk from regulatory criteria, the Act addresses the critical challenge of discriminatory debanking practices, promoting a fairer and more inclusive environment for emerging technologies.
Political and State-Level Support
Unified Backing from Republican Senators
Support for the FIRM Act also extends to the political arena, with unanimous backing from Republican members of the Banking Committee. Senators such as Mike Crapo, Mike Rounds, Thom Tillis, John Kennedy, and several others have thrown their weight behind the legislation. This collective endorsement underscores the perceived importance of the FIRM Act in rectifying the current regulatory landscape.
By advocating for the elimination of reputational risk in regulatory supervision, these senators are aligning themselves with the goal of creating a more objective and impartial financial oversight system. This bipartisan show of support highlights the critical need to address the detrimental effects of politicized regulatory practices on the financial sector and underscores the broad consensus on the necessity for reform.
State Financial Officers’ Concerns
On March 6, 2025, Chairman Tim Scott (R-S.C.) introduced the Financial Integrity and Regulation Management (FIRM) Act. This crucial legislation aims to eliminate the practice of using reputational risk in regulatory oversight. The goal of enacting the FIRM Act is to prevent regulators from discriminating against businesses that are federally legal and to stop the process of debanking, which has negatively impacted various industries. This proposal has received considerable backing from significant stakeholders in the financial services industry and from organizations representing sectors that have been affected by debanking. The introduction of the FIRM Act marks a significant step toward ensuring fair treatment of all businesses under federal law, protecting them from unjust practices based on reputational concerns. It underscores a commitment to fostering a more inclusive and equitable financial system, providing stability and support to businesses that have previously faced challenges due to debanking practices.
