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In August 2025, President Donald Trump issuedan executive order broadly aimed at preventing banks from closing or restricting accounts due to a customer's "political or religious beliefs,"a practice known as "debanking." The order, titled "Guaranteeing Fair Banking for All Americans," instructs federal banking regulators to revise supervisory practices, amend rules and regulations relating to debanking, investigate banks, and potentially impose penalties for allegations of debanking. The order gives regulators 180 days to remove "reputation risk" concepts from their rules and guidance and directs the Small Business Administration to require all financial institutions with which it guarantees loans to, within 120 days, identify and reinstate previous and potential clients impacted by debanking. Within 180 days of the executive order, the Secretary of the Treasury must develop a strategy, including potential legislative and regulatory options, to further combat debanking. The order also gives Federal banking regulators 120 days to review and identify financial institutions that are currently, or have previously, engaged in debanking activities and take appropriate remedial action – including imposing fines and issuing consent decrees. Lastly, the banking regulators must review supervisory and complaint data to identify any financial institutions engaged in debanking activities and refer them to the Attorney General if they cannot obtain compliance.
This executive order is a significant development in the debanking discussion. Debanking has historically been a "de-risking" practice, where banks decline to engage with specific clients due to perceived risks. The practice accelerated after the 2008 financial crisis, as financial institutions faced mounting demands to prevent financial crimes and misconduct. Despite increasing allegations of improper debanking in recent years, banks largely contend that account closures and denials are based on risk management and other lawful grounds.
The debanking executive order previews potential new regulatory and litigation exposure for financial institutions.
The postExecutive Order Takes Aim at "Debanking"appeared first onConsumer Finance Insights (CFI).
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