FIRM Act
The Financial Integrity and Regulation Management Act (FIRM Act) would remove reputational risk as a factor in the supervision of depository institutions. In practice, this means Federal banking agencies would have to stop using or referencing reputational risk in guidance, examinations, supervisory findings, ratings, and enforcement actions, and would need to rewrite internal materials to exclude this concept. The bill also expands who counts as a Federal banking agency (including the CFPB and NCUA) and defines reputational risk and related terms. A key exception permits negative publicity or public concerns about unlawful transactions when those concerns involve state sponsors of terrorism or foreign terrorist organizations. The bill requires agencies to report back to Congress within 180 days on implementation.
Key Points
- 1Prohibits the use of reputational risk in the supervision of depository institutions and requires removing references to reputational risk from agency guidance, examination manuals, and similar documents.
- 2Bans any activity by Federal banking agencies related to reputational risk, including rules, examinations, findings, ratings, or enforcement actions based on reputational risk.
- 3Expands definitions to include CFPB and NCUA among Federal banking agencies and clarifies what counts as reputational risk.
- 4Establishes a narrow exception: reputational concerns about unlawful transactions related to state sponsors of terrorism or foreign terrorist organizations are not swept away by the prohibition.
- 5Requires a reporting deadline: within 180 days of enactment, each agency must report to Congress on implementation and policy changes made to comply with the Act.