House legislators advance a proposed bill aimed at managing potential harm to a company's or individual's standing due to unforeseen risks or actions.
In recent news, a bill has been introduced in the House of Representatives, aiming to phase out reputational risk as a metric in bank supervision. The bill, sponsored by Reps. Andy Barr and Ritchie Torres, seeks to refocus regulatory oversight more narrowly on concrete, measurable risks.
The bill proposes explicit prohibition of reputational risk as a supervisory metric, instead focusing on material and objective measures. This move is designed to prevent politically motivated de-banking and ensure fair access to banking services for all credit-worthy Americans.
The bill is part of a broader effort to address regulatory abuses under initiatives like Operation Choke Point, which have been criticised for their subjective supervisory criteria. The legislation will ensure that access to banking is determined by sound business practices, not partisan pressure.
The bill remains under consideration in the House, reflecting ongoing efforts to refocus regulatory oversight. Banking industry groups, including the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, and Financial Services Forum, have shown support for constraints on supervisory discretion and regulatory overreach, aligning with the bill’s spirit.
However, no direct public positions have been issued by the Office of the Comptroller of the Currency (OCC) or the Federal Deposit Insurance Corporation (FDIC) regarding this specific bill. Nevertheless, the regulatory landscape indicates collaboration with Congress and banking groups to refine supervision standards, emphasizing objective rather than discretionary criteria.
Related Congressional efforts, including other bills led by Torres and others, focus on tailored supervision that reduces burdens on banks while maintaining safety and soundness. This legislative environment contextualises the Barr-Torres bill's intent to limit subjective supervisory criteria like reputational risk.
The issue of de-banking has been a topic of concern for some time. At least one Democratic senator, Elizabeth Warren of Massachusetts, has expressed concern about de-banking, citing analysis that notes nearly 12,000 de-banking-related complaints were filed by consumers over the past three years, with more than half of those complaints made against the four biggest U.S. banks.
The FDIC's acting chair, Travis Hill, has stated that the agency would stop using reputational risk in its supervision of financial institutions. Tim Scott, who introduced the bill in the Senate, has applauded this move and aims to prevent politically motivated de-banking through his legislation.
The Trump Organization has also filed a lawsuit against Capital One over de-banking issues, alleging the bank closed around 300 Trump Organization accounts over "woke" beliefs and political and social motivations. President Donald Trump has also called out Bank of America and JPMorgan Chase for allegedly dropping conservative customers during a virtual appearance at the World Economic Forum in Davos, Switzerland.
In summary, the Barr-Torres bill is currently active in the House, proposing explicit prohibition of reputational risk as a supervisory metric in favor of material, objective measures. Banking industry groups show support for constraints on supervisory discretion and regulatory overreach consistent with the bill’s intent. No direct public positions from the OCC or FDIC have been issued regarding the bill, but regulatory cooperation with Congress to streamline supervision and promote fair access is ongoing. The issue of de-banking continues to be a topic of concern, with the Barr-Torres bill aiming to address this issue by limiting subjective supervisory criteria like reputational risk.
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- The financial sector, politics, and general news are intertwined, as evidenced by the Barr-Torres bill, which seeks to address the issue of politically motivated de-banking by limiting subjective supervisory criteria like reputational risk in bank supervision.
- The implications of this bill go beyond the banking industry, potentially impacting business relationships and investment strategies, as it aims to refocus regulatory oversight more narrowly on concrete, measurable risks.
