Washington, D.C. — Following the introduction of the Financial Integrity and Regulation Management (FIRM) Act by Senate Banking Committee Chairman Tim Scott (R-SC), a bill that would prohibit federal banking agencies from considering reputational risk in their supervision of depository institutions, the American Economic Liberties Project released the following statement in opposition to the bill.

“The FIRM Act is a deregulatory giveaway to Wall Street that Congressional Republicans are masking as a fight against ‘debanking,’” said Morgan Harper, Director of Policy and Advocacy at the American Economic Liberties Project. “In fact, this bill would do nothing to actually prevent banks from denying services to people or small businesses, but instead prevent regulators from holding those banks accountable when they take risks that threaten the stability of the entire economy. It’s unfortunate to see Senator Scott not only push against the bipartisan mission of ending debanking, but instead spin this backdoor gift to the Big Banks as defending consumers and small businesses from that threat.”

Reputational risk is a real financial concern that both banks themselves and regulators take into account to evaluate the health and stability of financial institutions. Banks and regulators both know that when financial institutions overleverage themselves or engage in shady behavior, they can lose the confidence of consumers and investors, which could potentially lead to instability and failure. Only 2 years after after the collapse of Silicon Valley Bank, Silvergate Bank, and Signature Bank, which showed clear signs of reputational risk, this bill would take one of the banking regulators’ most basic tools off the table to prevent future financial crises and protect consumers.

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