Sen. Tim Scott highlights end of debanking, calls for balanced bank regulation

WASHINGTON - U.S. Senator Tim Scott (R-SC), Chairman of the Senate Banking Committee, this week applauded recent progress ending debanking practices and removing "reputation risk" from federal bank supervision, urging regulators to restore balance and ensure rules support both financial stability and economic growth. At a hearing with Federal Reserve Vice Chair for Supervision Michelle Bowman, FDIC Chairman Travis Hill, Comptroller of the Currency Jonathan Gould, and NCUA Chairman Kyle Hauptman focused on prudential bank regulation. Sen. Scott highlighted the Committee's FIRM Act and President Trump's Executive Order, reinforcing that banking decisions should be based on financial risk, not politics.

Sen. Scott emphasized that overregulation in recent years made it harder for community banks and credit unions to serve families and small businesses, including in South Carolina, without meaningfully improving safety and soundness. He stressed the need to recalibrate capital requirements, modernize regulatory thresholds, and focus supervision on material financial risks so that rules designed in Washington do not make it harder for small businesses to grow or families to achieve homeownership.

Sen. Scott's opening remarks as delivered:

Good morning. I want to thank Vice Chair Bowman, Chair Hill, Comptroller Gould, and Chairman Hauptman for being here today.

I want to begin by applauding the progress made on debanking and reputation risk.

This Committee advanced the FIRM Act because banking decisions should be based on financial risk, not politics.

President Trump reinforced that principle through his Executive Order on debanking.

No lawful business in Anderson, South Carolina, or anywhere in America, should be denied access to banking services because of shifting political winds or subjective considerations like reputation risk.

I appreciate your efforts to refocus bank regulation on core financial risks to keep our financial system safe, but also make sure that families and small businesses can still have access to credit.

Over the past several years, rules that did not make our banking system safer have been piling up. Though they did not make Americans safer, this overregulation did have one effect.

It made it harder for banks and credit unions to serve their customers.

And when those institutions struggle, families struggle.

Small businesses struggle.

And first-time homebuyers struggle.

Strong safeguards and economic growth are not opposites.

In fact, when our economy is growing, and Americans are working, saving, and investing, our financial system becomes stronger, not weaker.

That is why getting the balance right actually matters a lot.

One important step is making sure capital rules reflect real-world risk without unnecessarily holding back lending.

I appreciate your agencies' work to rethink Biden-era proposals, like Basel III endgame, that would have significantly increased capital requirements to the detriment of our economy.

We must ensure that rules designed in Washington do not make it harder for small businesses in Spartanburg, South Carolina, or across the country to grow.

Vice Chair Bowman, I was encouraged by your comments last week about helping banks return to mortgage lending. Thank God.

That aligns with our work on the ROAD to Housing Act, which is focused on reducing red tape and increasing housing supply so more Americans can achieve the American Dream of homeownership.

We also need rules that keep up with the times.

When regulatory thresholds are frozen in place for years, they do not reflect the size of today's economy.

As our economy grows, our regulatory framework should be modernized with it, in a way that maintains safety while encouraging opportunity.

I appreciate that the banking regulators have a renewed focus on tailoring to ensure their policies are designed to fit the unique nature of each institution.

I sent a letter to the banking agencies yesterday in support of updating the prudential bank regulatory tailoring categories based on nominal GDP. I look forward to seeing a proposal sometime soon.

I also want to commend the agencies for recent efforts to focus supervision on material financial risks and enhance the independence and efficiency of the appeals process.

This enables financial institutions to serve their customers effectively while maintaining safety and soundness. Having a robust process for appealing supervisory determinations is necessary to provide regulated institutions with due process and transparency.

Finally, I look forward to your agencies' continued progress in implementing the GENIUS Act.

Bringing digital assets and stablecoins into clear, regulated frameworks strengthens consumer protection and ensures innovation happens here at home in the United States, and not overseas.

At the end of the day, the decisions made by this Committee and by our banking regulators have real consequences.

They affect whether a family can qualify for a mortgage.

Whether a small business can expand.

Whether communities in Bamberg County, South Carolina, and across the country have access to the capital they need to grow.

Our responsibility is to ensure we have a banking system that is safe, resilient, and focused on real financial risk, while still supporting economic opportunity.

That is the balance we are working to achieve.

I look forward to today's hearing.

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