Americans for Free Markets Welcomes Introduction of House Legislation to Address Debanking

The House FIRM Act Serves as Companion Legislation to the Senate Bill and Collectively, Will Stop Regulators from Using Reputational Risk to Assess Bank Safety and Soundness  

Yesterday, Representatives Andy Barr (R-KY) and Ritchie Torres (D-NY) introduced the Financial Integrity and Regulation Management (FIRM) Act to prevent regulators from using reputational risk during the supervisory process for banks, which has allowed federal bureaucrats to impose their personal and political judgement instead of allowing banks to make independent business decisions based on risk and business judgement. The bill serves as companion legislation to the Senate version introduced by Chairman Tim Scott last month.

In response to the bill’s introduction, Americans for Free Markets (AFFM) Executive Director John Wittman issued the following statement of support:

“For years, federal banking regulators have applied vague reputational risk criteria to pressure banks from providing financial services to certain industries and individuals due to political considerations. This House legislation builds on the momentum under the leadership of the Trump administration and Republican lawmakers to reverse regulatory overreach, empower banks to make the best decisions for their business and customers while preventing future Operation Chokepoints from taking place. We urge lawmakers to pass both bills in the House and Senate to protect the free markets and ensure fair treatment of customers regardless of their background or beliefs.”

In case you missed it, banking regulators are also taking steps to remove reputational risk from the supervisory process. The Federal Deposit Insurance Corporation (FDIC) plans to release a framework that removes all references to reputational risk from its guidance.

This follows a recent announcement from the Office of the Comptroller of the Currency (OCC) stating the agency will remove reputational risk from its review process and guidance, marking a step toward limiting government intervention and ensuring fair access to financial services.

AFFM advisor and former U.S. Senator Pat Toomey (R-PA) posted on X a statement in support of the decision, applauding the move and urging for the codification of the announcement into law. He went on to remark that Chairman Tim Scott’s (R-SC) bill—the FIRM Act—would help achieve this. 

The FIRM Act addresses the weaponization of banks through regulation by preventing regulators from using reputational risk as a component of supervision to assess a bank’s financial safety and soundness. This standard is ambiguous and has been abused by some financial regulators to pressure banks into exiting law-abiding customers and businesses based on political considerations rather than objective financial criteria—a process known as debanking.

The FIRM Act is critical to ending the regulatory abuse and ensures clear, consistent and transparent federal banking rules to help protect consumers, communities and the financial system at-large while safeguarding the free market.

Earlier this month, Sen. Toomey voiced his support following Chairman Scott’s introduction of the FIRM Act, stating, “Financial regulators—also known as unelected bureaucrats—have used their regulatory power to pressure banks to debank industries that are disfavored due to partisan factors. Chairman Scott’s bill will prevent this misguided regulatory framework and the weaponization of banks in pursuit of political goals.”

Read more about AFFM’s support of the FIRM Act HERE and what AFFM members have to say on the legislation HERE.