Key Takeaways
- The new order could subject banks to civil or criminal liability if found to have engaged in discriminatory account closures or refusals of service
- White House said the move is meant to “safeguard freedom of expression and fair access to the banking system.”
In a signficant development, U.S. President Donald Trump signed an executive order on Thursday directing federal bank regulators to investigate and penalize financial institutions found to be engaging in “debanking”. It is referred to as a practice in which banks deny, restrict, or close a person’s or business’s bank account, often without clear explanation or recourse.
The order instructs regulators to refer cases of alleged discrimination to the Department of Justice and ensure banks do not deny services based on political or religious beliefs. The White House said the move is meant to “safeguard freedom of expression and fair access to the banking system.”
Debanking has become a politically charged issue in recent years. Critics allege that firearms manufacturers, fossil fuel companies, and crypto firms have all faced account closures or denials of service because of their industries. While banks typically cite risk concerns when ending relationships with clients, Trump and his allies argue that such actions often reflect political bias.
Trump himself has accused large institutions, including JPMorgan Chase and Bank of America, of cutting ties with his businesses. Both banks have denied these claims.
The new order could subject banks to civil or criminal liability if found to have engaged in discriminatory account closures or refusals of service. It also signals that financial regulators will be expected to monitor and act against perceived bias in banking decisions.
The order assumes significance for the crypto industry as it comes against the backdrop of a group of bank associations trying to block bank applications from four digital asset firms.
In a joint letter dated July 17 to the Office of the Comptroller of the Currency (OCC), five of the country’s largest banking associations-American Banking Association, Consumer Bankers Association, National Bankers Association, America’s Credit Unions and Independent Community Bankers of America urged the agency to reject trust charter applications from four digital asset firms, including Ripple and Fidelity.
The letter raises concerns over whether these crypto firms meet the fiduciary standards required of national trust banks. The associations also criticized the limited transparency in the applications, arguing that the publicly available materials do not allow for meaningful scrutiny.
