[Pages S4844-S4845]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

  SA 3104. Mr. SCOTT of South Carolina submitted an amendment intended 
to be proposed by him to the bill S. 2296, to authorize appropriations 
for fiscal year 2026 for military activities of the Department of 
Defense, for military construction, and for defense activities of the 
Department of Energy, to prescribe military personnel strengths for 
such fiscal year, and for other purposes; which was ordered to lie on 
the table; as follows:

       At the appropriate place, insert the following:

     SEC. _____. FINANCIAL INTEGRITY AND REGULATION MANAGEMENT.

       (a) Findings.--Congress finds that--
       (1) the primary objective of financial regulation and 
     supervision by the Federal banking agencies is to promote the 
     safety and soundness of depository institutions;
       (2) all federally legal businesses and law-abiding citizens 
     regardless of political ideology should have equal 
     opportunity to obtain financial services and should not face 
     unlawful discrimination in obtaining such services;
       (3) financial service providers are private entities 
     entitled to provide services to whichever customers they so 
     choose, provided that those decisions do not violate the law;
       (4) financial service providers should strive to ensure 
     that all business decisions are based on factors free from 
     unlawful prejudice or political influence;
       (5) the use of reputational risk in supervisory frameworks 
     encourages Federal banking agencies to regulate depository 
     institutions based on the subjective view of negative 
     publicity and provides cover for the agencies to implement 
     their own political agenda unrelated to the safety and 
     soundness of a depository institution;
       (6) Federal banking agencies have in fact used reputational 
     risk to limit access of federally legal businesses and law-
     abiding citizens to financial services in 2018 when the 
     Federal Deposit Insurance Corporation acknowledged that the 
     agency used reputational risk reviews to limit access to 
     financial services by certain industries, commonly known as 
     ``Operation Choke Point''; and
       (7) reputational risk does not appear in any statute and is 
     an unnecessary and improper use of supervisory authority that 
     does not contribute to the safety and soundness of the 
     financial system.
       (b) Definitions.--In this section:
       (1) Depository institution.--The term ``depository 
     institution''--
       (A) has the meaning given the term in section 3 of the 
     Federal Deposit Insurance Act (12 U.S.C. 1813); and
       (B) includes an insured credit union.
       (2) Federal banking agency.--The term ``Federal banking 
     agency''--
       (A) has the meaning given the term in section 3 of the 
     Federal Deposit Insurance Act (12 U.S.C. 1813); and
       (B) includes--
       (i) the National Credit Union Administration; and
       (ii) the Bureau of Consumer Financial Protection.
       (3) Insured credit union.--The term ``insured credit 
     union'' has the meaning given the term in section 101 of the 
     Federal Credit Union Act (12 U.S.C. 1752).

[[Page S4845]]

       (4) Reputational risk.--The term ``reputational risk'' 
     means the potential that negative publicity or negative 
     public opinion regarding an institution's business practices, 
     whether true or not, will cause a decline in confidence in 
     the institution or a decline in the customer base, costly 
     litigation, or revenue reductions or otherwise adversely 
     impact the depository institution.
       (c) Removal of Reputational Risk as a Consideration in the 
     Supervision of Depository Institutions.--Each Federal banking 
     agency shall remove from any guidance, rule, examination 
     manual, or similar document established by the agency any 
     reference to reputational risk, or any term substantially 
     similar, regarding the supervision of depository institutions 
     such that reputational risk, or any term substantially 
     similar, is no longer taken into consideration by the Federal 
     banking agency when examining and supervising a depository 
     institution.
       (d) Prohibition.--No Federal banking agency may engage in 
     any activity concerning or related to the regulation, 
     supervision, or examination, of the reputational risk, or any 
     term substantially similar, or the management thereof, of a 
     depository institution, including by--
       (1) establishing any rule, regulation, requirement, 
     standard, or supervisory expectation concerning or related to 
     the reputational risk, or any term substantially similar, or 
     the management thereof, of a depository institution whether 
     binding or not;
       (2) conducting any examination, assessment, data 
     collection, or other supervisory exercise concerning or 
     related to reputational risk, or any term substantially 
     similar, or the management thereof, of a depository 
     institution;
       (3) issuing any examination finding, supervisory criticism, 
     or other supervisory or examination communication concerning 
     or related to reputational risk, or any term substantially 
     similar, or the management thereof, of a depository 
     institution;
       (4) making any supervisory ratings decision or 
     determination that is based, in whole or in part, on any 
     matter concerning or related to reputational risk, or any 
     term substantially similar, or the management thereof, of a 
     depository institution; and
       (5) taking any formal or informal enforcement action that 
     is based, in whole or in part, on any matter concerning or 
     related to reputational risk, or any term substantially 
     similar, or the management thereof, of a depository 
     institution.
       (e) Taking Account of Institutions With Low Operational 
     Risk.--
       (1) Tailoring regulation to business model and risk.--
       (A) Definitions.--In this paragraph--
       (i) the term ``Federal financial institutions regulatory 
     agency'' means the Office of the Comptroller of the Currency, 
     the Board of Governors of the Federal Reserve System, the 
     Federal Deposit Insurance Corporation, the National Credit 
     Union Administration, and the Bureau of Consumer Financial 
     Protection; and
       (ii) the term ``regulatory action''--

       (I) means any proposed, interim, or final rule or 
     regulation; and
       (II) does not include any action taken by a Federal 
     financial institutions regulatory agency that is solely 
     applicable to an individual institution, including an 
     enforcement action or order.

       (B) Consideration and tailoring.--For any regulatory action 
     occurring after the date of enactment of this Act, each 
     Federal financial institutions regulatory agency shall--
       (i) take into consideration the risk profile and business 
     models of each type of institution or class of institutions 
     subject to the regulatory action; and
       (ii) tailor the regulatory action applicable to an 
     institution, or type of institution, in a manner that limits 
     the regulatory impact, including cost, human resource 
     allocation, and other burdens, on the institution or type of 
     institution as is appropriate for the risk profile and 
     business model involved.
       (C) Factors to consider.--In carrying out the requirements 
     of subparagraph (B), each Federal financial institutions 
     regulatory agency shall consider--
       (i) the aggregate impact of all applicable regulatory 
     actions on the ability of institutions to flexibly serve 
     their customers and local markets after the date of enactment 
     of this Act;
       (ii) the potential impact that efforts to implement the 
     applicable regulatory action and third-party service provider 
     actions may work to undercut efforts to tailor the regulatory 
     action described in subparagraph (B)(ii); and
       (iii) the statutory provision authorizing the applicable 
     regulatory action, the congressional intent with respect to 
     the statutory provision, and the underlying policy objectives 
     of the regulatory action.
       (D) Notice of proposed and final rulemaking.--Each Federal 
     financial institutions regulatory agency shall disclose and 
     document in every notice of proposed rulemaking and in every 
     final rulemaking for a regulatory action how the agency has 
     applied subparagraphs (B) and (C).
       (E) Limited look-back application.--
       (i) In general.--Each Federal financial institutions 
     regulatory agency shall--

       (I) conduct a review of all regulations issued in final 
     form pursuant to statutes enacted during the period beginning 
     on the date that is 7 years before the date on which this Act 
     is introduced in the Senate and ending on the date of 
     enactment of this Act; and
       (II) apply the requirements of this paragraph to the 
     regulations described in subclause (I).

       (ii) Revision.--Any regulation revised under clause (i) 
     shall be revised not later than 3 years after the date of 
     enactment of this Act.
       (F) Reports to congress.--Not later than 1 year after the 
     date of enactment of this Act, and annually thereafter, each 
     Federal financial institutions regulatory agency shall submit 
     to the Committee on Banking, Housing, and Urban Affairs of 
     the Senate and the Committee on Financial Services of the 
     House of Representatives a report on the specific actions 
     taken to tailor the regulatory actions of the Federal 
     financial institutions regulatory agency pursuant to the 
     requirements of this paragraph.
       (2) Short-form call reports for all banks eligible for the 
     community bank leverage ratio.--The appropriate Federal 
     banking agencies, as defined in section 3 of the Federal 
     Deposit Insurance Act (12 U.S.C. 1813), shall promulgate 
     regulations establishing a reduced reporting requirement for 
     all banks eligible for the Community Bank Leverage Ratio, as 
     defined in section 201(a) of the Economic Growth, Regulatory 
     Relief, and Consumer Protection Act (12 U.S.C. 5371 note), 
     when making the first and third report of condition of a 
     year, as required by section 7(a) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1817(a)).
       (3) Report to congress on modernization of supervision.--
     Not later than 18 months after the date of enactment of this 
     Act, the appropriate Federal banking agencies, as defined in 
     section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
     1813), in consultation with State bank supervisors, shall 
     submit to the Committee on Banking, Housing, and Urban 
     Affairs of the Senate and the Committee on Financial Services 
     of the House of Representatives a report on the modernization 
     of bank supervision, including the following factors:
       (A) Changing bank business models.
       (B) Examiner workforce and training.
       (C) The structure of supervisory activities within banking 
     agencies.
       (D) Improving bank-supervisor communication and 
     collaboration.
       (E) The use of supervisory technology.
       (F) Supervisory factors uniquely applicable to community 
     banks.
       (G) Changes in statutes necessary to achieve more effective 
     supervision.
       (f) Reports.--Not later than 180 days after the date of 
     enactment of this Act, each Federal banking agency shall 
     submit to the Committee on Banking, Housing, and Urban 
     Affairs of the Senate and the Committee on Financial Services 
     of the House of Representatives a report that--
       (1) confirms implementation of this section; and
       (2) describes any changes made to internal policies as a 
     result of this section.
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