S. 875: Financial Integrity and Regulation Management Act

The Financial Integrity and Regulation Management Act (FIRM Act) aims to modify how federal banking agencies supervise financial institutions. Here are the main points of the bill:

Key Objectives

• Removing Reputational Risk: The act requires federal banking agencies to eliminate "reputational risk" as a consideration when supervising depository institutions. This means they can no longer assess the potential negative publicity or public opinion about an institution's practices in their regulatory framework.
• Focus on Safety and Soundness: The primary focus of financial regulation should remain on promoting the safety and soundness of depository institutions, rather than on how these institutions might be perceived by the public.

Federal Banking Agencies

The act addresses the role of federal banking agencies, which include various entities such as the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve. It stipulates that these agencies must refrain from using reputational risk in their examinations, ratings, or enforcement actions against banks and other financial institutions.

Regulatory Prohibition

• No federal banking agency can create rules or regulations that involve reputational risk or manage it as a factor in their evaluations of depository institutions.
• This prohibition extends to conducting assessments, issuing findings, and making any supervisory rating decisions based on reputational risk.

Tailoring Regulation

The act also emphasizes that federal agencies should tailor regulatory actions based on the risk profile and business models of each financial institution. The goal is to minimize the regulatory burden, especially on smaller community banks.

Reporting and Accountability

• Within 180 days of the act's enactment, federal banking agencies are required to submit a report confirming implementation and detailing any internal policy changes.
• Additionally, federal agencies must report annually on how they are adapting their regulatory approach to align with the provisions of the act.

Community Banks

The bill includes provisions for community banks to benefit from reduced reporting requirements when they qualify under specific criteria, designed to alleviate regulatory burdens.

Conclusion of the Bill's Purpose

The overall aim of the FIRM Act is to ensure that financial regulations are fair and do not unfairly disadvantage any federally legal businesses or individuals seeking financial services, by focusing solely on the operational factors of financial institutions without considering public sentiment or reputational concerns.

Relevant Companies

None found.