The Senate Banking Committee voted Thursday to advance legislation seeking to strike "reputational risk" from the toolkit of U.S. regulators considering vulnerabilities at financial institutions. Why it matters: Supporters of the FIRM Act argue that it removes a subjective standard open to abuse by administrations looking to target disfavored industries.

Senator Tim Scott, the chief of the banking committee, is backing a bill to stop U.S. regulators from citing "reputational risk" as a reason to block clients.

The Senate Banking Committee is considering bills to create a regulatory framework for dollar-denominated stablecoins and to prevent debanking due to "reputational risk."