WASHINGTON – On Thursday, President Donald Trump signed an executive order that aims to end a practice called “debanking,” in which banks and their regulators are said to deny certain consumers financial services for ideological reasons. The White House said that the directive is meant to make sure that banking decisions are based only on “individualized, objective, and risk-based analyses” and not on political or religious beliefs.
The presidential order tells federal banking regulators and other agencies to do a number of things:
Remove Reputational Risk Standards: Federal training and guidance materials that say “reputational risk” is a basis to reject banking services will no longer be used. This practice has caused a lot of problems for industries that have had trouble getting loans and other services.
Find Past Violations: Regulators must find banks that have done “unlawful debanking” in the past.
Impose Fines and Penalties: Federal authorities can punish or take other “remedial measures” against institutions that have such practices.
forward Religious-Based Debanking to the Justice Department: Regulators should look over complaint data and forward cases of illegal debanking based on religion to the Justice Department for more action.
Action by the Small Business Administration (SBA): Banks and other financial institutions that fall under the SBA’s authority must now “make reasonable efforts to reinstate clients who were unlawfully denied services.”
This executive order is a direct response to objections that conservatives and some industries, such as gun makers, fossil fuel companies, and cryptocurrency companies, have had for a long time. These groups say that big Wall Street firms have closed accounts or refused to provide services for political reasons. The decision also comes after President Trump’s recent public comments. In an interview with CNBC, he said that he had been a victim of bank prejudice, giving examples from JPMorgan Chase and Bank of America. Both banks have said that these claims are false.
Lawmakers have also been working on the subject of “debanking.” This year, Congress has brought back bills like the “Fair Access to Banking Act,” which would stop banks from using certain lending programs if they don’t give “fair access” to their services. Groups in the gun business have backed these bills.
On the same day that this executive order was signed, another order was signed to make it easier for people to invest in private equity, real estate, and cryptocurrency in their retirement accounts. This shows that the Trump administration is trying to change the financial services industry and support industries that have been important to his political campaigns.