Sponsors (13)
The bill trades increased predictability and lower compliance burdens for banks (especially small/community banks) — and improved congressional transparency — against reduced regulatory flexibility to act on reputational signals, which could raise risks to consumers, financial stability, and national security.
Depository institutions (banks and credit unions) will face clearer, narrower supervisory standards that limit use of vague 'reputational risk' judgments, making exams and enforcement more predictable.
Smaller and community banks will have lower compliance burdens — including shorter call reports and risk‑tailored rules — reducing operating costs and helping preserve local lending to small businesses and rural customers.
Removing subjective reputational criteria reduces discretionary enforcement levers and promotes consistent, predictable supervisory treatment across institutions.
Consumers, depositors, and taxpayers could face higher risk because regulators would be less able to act on reputational harms that signal misconduct, weakening incentives for banks to avoid practices that harm customers or public trust.
National security and financial stability risks could increase because limiting consideration of reputational risk narrows regulators' flexibility to address illicit finance, sanctions exposure, runs, or other non‑financial threats that materialize through public perception.
The bill may create regulatory blind spots and encourage some banks to cut compliance, monitoring, or public‑interest policies, making it harder for agencies to detect crime, fraud, or emerging risks tied to reputational signals.
Based on analysis of 7 sections of legislative text.
Bars federal banking agencies from using 'reputational risk' in supervision, requires removal of such references, mandates tailored rulemaking, reduced call reports for eligible community banks, and reporting to Congress.
Prohibits federal banking agencies from using “reputational risk” (or similar language) as a basis for supervision, examination, enforcement, rulemaking, or supervisory ratings, and requires agencies to remove references to reputational risk from guidance and manuals. It also requires regulators to tailor rules to institution risk and business model, create reduced call-report forms for banks eligible for the Community Bank Leverage Ratio for certain quarterly reports, produce a supervision modernization report, and file implementation reports to congressional banking committees within set deadlines.
Introduced March 6, 2025 by Tim Scott · Last progress March 6, 2025