What changed between these versions
A substantive refinement to the bill's definitions. v2 removes the 'Purposes' subsection from the findings and clarifies the definition of 'depository institution'. Crucially, v2 modifies the definition of 'reputational risk' to exclude negative publicity related to unlawful transactions with state sponsors of terrorism or foreign terrorist organizations, adding new definitions for these terms.
Overview
A handful of significant changes concentrated within the findings and definitions sections. · v2 refines the scope of the bill by removing an explicit 'Purposes' statement and, more importantly, narrows the application of the 'reputational risk' definition to exclude specific national security concerns, while also clarifying other definitions.
The most significant change in v2 is the modification to the definition of 'reputational risk' in Section 3(4), which now explicitly excludes negative publicity related to unlawful transactions with state sponsors of terrorism or foreign terrorist organizations. This change is supported by the addition of new definitions for 'foreign terrorist organization' and 'state sponsors of terrorism'. Additionally, v2 removes the 'Purposes' subsection from Section 2 and streamlines the definition of 'depository institution' by incorporating the reference for 'insured credit union' directly.
Major additions
This new subsection defines 'foreign terrorist organization' as a foreign organization designated by the Secretary of State in accordance with section 219 of the Immigration and Nationality Act.
This addition is significant because it provides a statutory basis for an exclusion within the modified 'reputational risk' definition, ensuring that negative publicity related to such organizations does not fall under the prohibited supervisory considerations. It clarifies the scope of activities that Federal banking agencies may still consider.
This new subsection defines 'state sponsors of terrorism' by referencing specific sections of the Export Control Reform Act of 2018, the Foreign Assistance Act of 1961, the Arms Export Control Act, or any other provision of law where a country's government is determined by the Secretary of State to have repeatedly provided support for acts of international terrorism.
This addition is significant as it, like the 'foreign terrorist organization' definition, provides a statutory basis for an exclusion within the modified 'reputational risk' definition. It ensures that negative publicity concerning unlawful transactions with these entities remains a valid supervisory concern, preventing unintended consequences of the bill's primary objective.
Deletions
v1 included a subsection titled 'Purposes' within Section 2, which outlined the objectives of the Act. This subsection was removed in v2.
The deletion of the explicit 'Purposes' subsection means that the bill's objectives are now solely inferred from its 'Findings' and operative provisions, rather than being separately stated. This is a structural change that removes a declarative statement of intent, though the 'Findings' remain to provide context for the bill's intent.
v1 included a standalone definition for 'insured credit union' stating it has the meaning given in section 101 of the Federal Credit Union Act (12 U.S.C. 1752).
This definition was deleted as a standalone item because its content was integrated directly into the definition of 'depository institution' in Section 3(1)(B). The deletion streamlines the definitions section by avoiding redundancy, but does not alter the substantive meaning or scope of 'insured credit union' within the Act.
Modifications
This is primarily a structural and formatting change. It removes the explicit 'Purposes' section and streamlines the presentation of the 'Findings' without altering their content or the core policy of the bill.
Before
Section 2 in v1 was titled 'FINDINGS; PURPOSES' and contained a subsection (a) for 'Findings' and implicitly a subsection (b) for 'Purposes'.
After
Section 2 in v2 is now titled 'FINDINGS' and the 'Findings' are no longer enumerated under a subsection (a), but directly follow the section title.
This modification clarifies the source of the definition for 'insured credit union' within the 'depository institution' term. It consolidates information, making the definition more precise and self-contained, without changing the entities covered.
Before
The definition of 'depository institution' in v1 stated it 'includes an insured credit union'.
After
The definition of 'depository institution' in v2 states it 'includes an insured credit union, as such term is defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752)'.
This modification significantly impacts Federal banking agencies and depository institutions. It clarifies that while general reputational risk is removed from supervisory consideration, agencies can still consider negative publicity stemming from unlawful transactions with state sponsors of terrorism or foreign terrorist organizations. This ensures that the bill's intent to curtail 'political weaponization' does not inadvertently shield institutions engaged in activities that pose genuine national security risks, thereby maintaining a specific area of supervisory oversight.
Before
The definition of 'reputational risk' in v1 broadly covered potential negative publicity or public opinion regarding an institution's business practices, whether true or not, that could adversely impact the institution.
After
The definition of 'reputational risk' in v2 includes the same broad coverage but adds an explicit exclusion: 'The previous sentence does not apply to negative publicity or negative public opinion regarding an institution's business practices where such practices involve unlawful transactions in connection with state sponsors of terrorism or foreign terrorist organizations.'
Scope
Meaningful expansion or narrowing — Changes are concentrated in the introductory sections of the bill, specifically Section 2 (Findings) and Section 3 (Definitions). The core operative sections (Sections 4, 5, and 6) remain unchanged. — v2 represents a refinement within the same policy direction. The core intent to eliminate reputational risk as a supervisory component remains, but v2 introduces a critical carve-out to ensure that this elimination does not extend to national security-related financial activities. — The changes to the 'reputational risk' definition directly interact with and narrow the scope of the prohibitions outlined in Section 4 and Section 5, by specifying circumstances under which reputational concerns can still be considered. The new definitions for 'foreign terrorist organization' and 'state sponsors of terrorism' are integral to this interaction.
Impact analysis
Federal banking agencies
Procedural clarification and retention of specific oversight capacity.
Agencies are now explicitly permitted to consider negative publicity related to unlawful transactions with state sponsors of terrorism or foreign terrorist organizations when supervising depository institutions, despite the general prohibition on reputational risk.
Depository institutions engaged in unlawful transactions with state sponsors of terrorism or foreign terrorist organizations
Retention of existing scrutiny.
Negative publicity related to these specific unlawful activities will continue to be a valid supervisory concern, meaning the protections against reputational risk considerations do not apply to them.
Depository institutions generally
Procedural clarification.
The clarification of the 'depository institution' definition provides more precise statutory referencing, but does not alter the scope of institutions covered by the Act.