Short title

This Act may be cited as the

Financial Integrity and Regulation Management Act

or the

FIRM Act

Findings

Congress finds that—(1)the primary objective of financial regulation and supervision by the Federal banking agencies is to promote safety and soundness of depository institutions;(2)all federally legal businesses and law-abiding citizens regardless of political ideology should have equal opportunity to obtain financial services and should not face unlawful discrimination in obtaining such services;(3)financial service providers are private entities entitled to provide services to whichever customers they so choose, provided that those decisions do not violate the law;(4)financial service providers should strive to ensure that all business decisions are based on factors free from unlawful prejudice or political influence;(5)the use of reputational risk in supervisory frameworks encourages Federal banking agencies to regulate depository institutions based on the subjective view of negative publicity and provides cover for the agencies to implement their own political agenda unrelated to the safety and soundness of a depository institution;(6)Federal banking agencies have in fact used reputational risk to limit access of federally legal businesses and law-abiding citizens to financial services in 2018 when the Federal Deposit Insurance Corporation acknowledged that the agency used reputational risk reviews to limit access to financial services by certain industries, commonly known as Operation Choke Point; and(7)reputational risk does not appear in any statute and is an unnecessary and improper use of supervisory authority that does not contribute to the safety and soundness of the financial system.

Definitions

In this Act:(1)

Depository institution

The term depository institution—(A)has the meaning given the term in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); and(B)includes an insured credit union, as such term is defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752).(2)

Federal banking agency

The term Federal banking agency—(A)has the meaning given the term in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); and(B)includes—(i)the National Credit Union Administration; and(ii)the Bureau of Consumer Financial Protection. (3)

Foreign terrorist organization

The term foreign terrorist organization means a foreign organization that is designated by the Secretary of State in accordance with section 219 of the Immigration and Nationality Act (8 U.S.C. 1189).(4)

Reputational risk

The term reputational risk means the potential that negative publicity or negative public opinion regarding a depository institution’s business practices, whether true or not, will cause a decline in confidence in the institution or a decline in the customer base, costly litigation, or revenue reductions or otherwise adversely impact the depository institution. The previous sentence does not apply to negative publicity or negative public opinion regarding an institution’s business practices where such practices involve unlawful transactions in connection with state sponsors of terrorism or foreign terrorist organizations.(5)

State sponsors of terrorism

The term state sponsors of terrorism means a country, the government of which has been determined by the Secretary of State to have repeatedly provided support for acts of international terrorism, for purposes of—(A)section 1754(c)(1)(A)(i) of the Export Control Reform Act of 2018 (50 U.S.C. 4813(c)(1)(A)(i));(B)section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371);(C)section 40(d) of the Arms Export Control Act (22 U.S.C. 2780(d)); or(D)any other provision of law.

Removal of reputational risk as a consideration in the supervision of depository institutions

Each Federal banking agency shall remove from any guidance, rule, examination manual, or similar document established by the agency any reference to reputational risk, or any term substantially similar, regarding the supervision of depository institutions such that reputational risk, or any term substantially similar, is no longer taken into consideration by the Federal banking agency when examining and supervising a depository institution.

Prohibition

No Federal banking agency may engage in any activity concerning or related to the regulation, supervision, or examination of the reputational risk, or any term substantially similar, or the management thereof, of a depository institution, including—(1)establishing any rule, regulation, requirement, standard, or supervisory expectation concerning or related to the reputational risk, or any term substantially similar, or the management thereof, of a depository institution whether binding or not;(2)conducting any examination, assessment, data collection, or other supervisory exercise concerning or related to reputational risk, or any term substantially similar, or the management thereof, of a depository institution;(3)issuing any examination finding, supervisory criticism, or other supervisory or examination communication concerning or related to reputational risk, or any term substantially similar, or the management thereof, of a depository institution;(4)making any supervisory ratings decision or determination that is based, in whole or in part, on any matter concerning or related to reputational risk, or any term substantially similar, or the management thereof, of a depository institution; and(5)taking any formal or informal enforcement action that is based, in whole or in part, on any matter concerning or related to reputational risk, or any term substantially similar, or the management thereof, of a depository institution.

Reports

Not later than 180 days after the date of enactment of this Act, each Federal banking agency shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that—(1)confirms implementation of this Act; and(2)describes any changes made to internal policies as a result of this Act.