S. 875, the FIRM Act

Bill Summary

S. 875 would prohibit the consideration of reputational risk by the relevant federal financial regulators when regulating, examining, or supervising financial institutions. Those federal financial regulators include the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the National Credit union association (NCUA), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve.

The bill also would require federal financial regulatory agencies to limit the burden of financial regulations by tailoring regulatory actions to the relevant institutions based on their risk profiles and business models. Additionally, S. 875 would reduce certain reporting requirements for community banks eligible for a simplified capital leverage ratio and require federal banking agencies to report on the modernization of bank supervision.

Estimated Federal Cost

The estimated budgetary effect of S. 875 is shown in Table 1. The costs of the legislation fall within budget function 370 (commerce and housing credit).

Basis of Estimate

CBO expects that S. 875 will be enacted in fiscal year 2026. Enacting the bill would impose additional administrative costs on the federal financial regulators, CBO estimates. We expect that during the three years after enactment, the regulatory agencies would conduct rulemaking, publish reports, and train examiners. After that, the agencies would incur additional administrative costs for ongoing tailoring of regulations.

Direct Spending

The operating costs for the CFPB, FDIC, NCUA, and OCC are classified in the federal budget as direct spending. Using information from the affected agencies, CBO estimates that enacting the bill would increase gross direct spending by $35 million over the 2026-2035 period for the FDIC, NCUA, and OCC. However, the NCUA and OCC are authorized to collect fees from regulated institutions to cover administrative expenses. After accounting for those fees, CBO estimates that enacting S. 875 would increase net direct spending for those three agencies by $15 million over the 2026-2035 period.

Under current law, the CFPB is permanently authorized to spend amounts transferred from the combined earnings of the Federal Reserve in an amount necessary to carry out its responsibilities, subject to a statutory cap that was most recently lowered by the 2025 reconciliation act. CBO expects that the CFPB will spend all the transferred funds up to its cap in each year over the 2026-2035 period for its current activities, so CBO does not attribute any increase in direct spending for the CFPB to this bill.

Revenues

Costs incurred by the Federal Reserve reduce remittances to the Treasury, which are recorded in the budget as revenues. CBO estimates that enacting S. 875 would decrease revenues by $15 million over the 2026-2035 period.

Changes in costs for the Federal Reserve banks have historically resulted in changes to remittances during the same year. However, since fiscal year 2023, the central bank has recorded a deferred asset to account for accrued net losses from expenses in excess of income. As a result, remittances have been largely suspended. In CBO’s projections, remittances from the Federal Reserve will generally be suspended until 2030, and until they resume, most changes in costs incurred by the system will not be recorded as changes in remittances.[1]

Spending Subject to Appropriation

Because CBO expects that, under current law, the CFPB will spend all transferred funds up to its statutory cap in the years that the combined earnings of the Federal Reserve are sufficient to fund the CFPB, any spending for additional costs from implementing the bill would need to be provided by future appropriations. The appropriations for 2026 did not include any additional amounts for the CFPB. As a result, CBO does not expect the agency would receive future appropriations to cover the additional activities required by S. 875. On that basis, CBO expects that enacting S. 875 would have no effect on federal spending for the CFPB.

Pay-As-You-Go Considerations

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays and revenues that are subject to those pay-as-you-go procedures are shown in Table 2.

Increase in Long-Term Net Direct Spending and Deficits

CBO estimates that enacting S. 875 would not increase net direct spending by more than $2.5 billion in any of the four consecutive 10-year periods beginning in 2036.

CBO estimates that enacting S. 875 would not increase on‑budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2036.

Mandates

If federal banking regulators increase annual fees to offset the costs of implementing the bill, S. 875 would increase the costs of an existing private-sector mandate on entities required to pay those fees. CBO estimates that the incremental cost of the mandate would be small and would fall well below the annual threshold established in the Unfunded Mandates Reform Act (UMRA) for private-sector mandates ($206 million in 2025, adjusted annually for inflation).

The bill contains no intergovernmental mandates as defined in UMRA.

Estimate Prepared By

Federal Costs:

Julia Aman (for the Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency) 
David Hughes (for the Consumer Financial Protection Bureau)

Revenues: Nathaniel Frentz

Mandates: Rachel Austin

Estimate Reviewed By

Justin Humphrey
Chief, Finance, Housing, and Education Cost Estimates Unit

Joshua Shakin
Chief, Revenue Projections Unit

Kathleen FitzGerald 
Chief, Public and Private Mandates Unit

H. Samuel Papenfuss 
Deputy Director of Budget Analysis

Estimate Approved By