HR 2702 - FIRM Act

Overview

Bill Number: HR 2702

Title: FIRM Act

Status: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-164.

Introduced: April 08, 2025

Purpose and Intent

The FIRM Act (Financial Institution Risk Mitigation Act) aims to strengthen the regulatory framework for managing risks in the financial sector. The bill's primary goal is to enhance the stability and resilience of the U.S. financial system by improving the oversight and risk management practices of large financial institutions.

Key Provisions

• Establishes a new "Systemic Risk Council" to identify, monitor, and address emerging threats to financial stability
• Requires large banks and other systemically important financial institutions (SIFIs) to develop and regularly update comprehensive "living wills" detailing their resolution plans
• Grants the Federal Reserve enhanced authority to impose stricter prudential standards and capital requirements on SIFIs
• Mandates regular stress testing of SIFIs to assess their ability to withstand economic downturns and financial shocks
• Expands the scope of the Orderly Liquidation Authority to provide the FDIC with tools to resolve failing SIFIs in an orderly manner
• Enhances transparency and public disclosure requirements for SIFIs to improve market discipline

Affected Parties and Impacts

The FIRM Act primarily targets large, systemically important financial institutions, including banks, insurance companies, and other non-bank financial firms. These entities would face increased regulatory oversight, more stringent risk management requirements, and greater public disclosure obligations.

The legislation is expected to improve the overall stability and resilience of the U.S. financial system by reducing the risks posed by the failure of a major financial institution. Consumers and the broader economy may benefit from a more stable financial sector, but the increased compliance costs for SIFIs could potentially be passed on to customers.

Procedural and Timeline Considerations

The FIRM Act has been reported (amended) by the House Committee on Financial Services and is now awaiting consideration by the full House of Representatives. If passed by the House, the bill would then move to the Senate for further review and potential amendments before a final vote. If enacted, the provisions of the FIRM Act would be phased in over a multi-year period to allow financial institutions time to adapt to the new regulatory requirements.