[Congressional Record Volume 171, Number 130 (Tuesday, July 29, 2025)]
[Senate]
[Pages S4844-S4845]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 3104. Mr. SCOTT of South Carolina submitted an amendment intended
to be proposed by him to the bill S. 2296, to authorize appropriations
for fiscal year 2026 for military activities of the Department of
Defense, for military construction, and for defense activities of the
Department of Energy, to prescribe military personnel strengths for
such fiscal year, and for other purposes; which was ordered to lie on
the table; as follows:
At the appropriate place, insert the following:
SEC. _____. FINANCIAL INTEGRITY AND REGULATION MANAGEMENT.
(a) Findings.--Congress finds that--
(1) the primary objective of financial regulation and
supervision by the Federal banking agencies is to promote the
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.
(b) Definitions.--In this section:
(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.
(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) Insured credit union.--The term ``insured credit
union'' has the meaning given the term in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752).
[[Page S4845]]
(4) Reputational risk.--The term ``reputational risk''
means the potential that negative publicity or negative
public opinion regarding an 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.
(c) 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.
(d) 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 by--
(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.
(e) Taking Account of Institutions With Low Operational
Risk.--
(1) Tailoring regulation to business model and risk.--
(A) Definitions.--In this paragraph--
(i) the term ``Federal financial institutions regulatory
agency'' means the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the National Credit
Union Administration, and the Bureau of Consumer Financial
Protection; and
(ii) the term ``regulatory action''--
(I) means any proposed, interim, or final rule or
regulation; and
(II) does not include any action taken by a Federal
financial institutions regulatory agency that is solely
applicable to an individual institution, including an
enforcement action or order.
(B) Consideration and tailoring.--For any regulatory action
occurring after the date of enactment of this Act, each
Federal financial institutions regulatory agency shall--
(i) take into consideration the risk profile and business
models of each type of institution or class of institutions
subject to the regulatory action; and
(ii) tailor the regulatory action applicable to an
institution, or type of institution, in a manner that limits
the regulatory impact, including cost, human resource
allocation, and other burdens, on the institution or type of
institution as is appropriate for the risk profile and
business model involved.
(C) Factors to consider.--In carrying out the requirements
of subparagraph (B), each Federal financial institutions
regulatory agency shall consider--
(i) the aggregate impact of all applicable regulatory
actions on the ability of institutions to flexibly serve
their customers and local markets after the date of enactment
of this Act;
(ii) the potential impact that efforts to implement the
applicable regulatory action and third-party service provider
actions may work to undercut efforts to tailor the regulatory
action described in subparagraph (B)(ii); and
(iii) the statutory provision authorizing the applicable
regulatory action, the congressional intent with respect to
the statutory provision, and the underlying policy objectives
of the regulatory action.
(D) Notice of proposed and final rulemaking.--Each Federal
financial institutions regulatory agency shall disclose and
document in every notice of proposed rulemaking and in every
final rulemaking for a regulatory action how the agency has
applied subparagraphs (B) and (C).
(E) Limited look-back application.--
(i) In general.--Each Federal financial institutions
regulatory agency shall--
(I) conduct a review of all regulations issued in final
form pursuant to statutes enacted during the period beginning
on the date that is 7 years before the date on which this Act
is introduced in the Senate and ending on the date of
enactment of this Act; and
(II) apply the requirements of this paragraph to the
regulations described in subclause (I).
(ii) Revision.--Any regulation revised under clause (i)
shall be revised not later than 3 years after the date of
enactment of this Act.
(F) Reports to congress.--Not later than 1 year after the
date of enactment of this Act, and annually thereafter, each
Federal financial institutions regulatory 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 on the specific actions
taken to tailor the regulatory actions of the Federal
financial institutions regulatory agency pursuant to the
requirements of this paragraph.
(2) Short-form call reports for all banks eligible for the
community bank leverage ratio.--The appropriate Federal
banking agencies, as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813), shall promulgate
regulations establishing a reduced reporting requirement for
all banks eligible for the Community Bank Leverage Ratio, as
defined in section 201(a) of the Economic Growth, Regulatory
Relief, and Consumer Protection Act (12 U.S.C. 5371 note),
when making the first and third report of condition of a
year, as required by section 7(a) of the Federal Deposit
Insurance Act (12 U.S.C. 1817(a)).
(3) Report to congress on modernization of supervision.--
Not later than 18 months after the date of enactment of this
Act, the appropriate Federal banking agencies, as defined in
section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813), in consultation with State bank supervisors, 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 on the modernization
of bank supervision, including the following factors:
(A) Changing bank business models.
(B) Examiner workforce and training.
(C) The structure of supervisory activities within banking
agencies.
(D) Improving bank-supervisor communication and
collaboration.
(E) The use of supervisory technology.
(F) Supervisory factors uniquely applicable to community
banks.
(G) Changes in statutes necessary to achieve more effective
supervision.
(f) 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 section; and
(2) describes any changes made to internal policies as a
result of this section.
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