Option to build banks with MP2/MP3 gone despite playback support still being there

Is there any official reason for this? (i.e. MP3 support being deprecated, licensing issues for the codec, etc)

We removed support for encoding banks in MP3 format in favour of Vorbis in FMOD Studio version 1.04.00. We did this because Vorbis compression provides twice the quality for the same bitrate, and has lower encoder delay.

To the best of my knowledge, FMOD Studio has never supported building banks in MP2 format.

FMOD in general did support layer 2 alongside layer 3

Pre-Studio versions of FMOD did support MP2 sound banks, but not FMOD Studio.