{"id":90503,"date":"2025-08-08T16:49:19","date_gmt":"2025-08-08T21:49:19","guid":{"rendered":"https:\/\/www.mcguirewoods.com\/?post_type=insight&#038;p=90503"},"modified":"2025-08-08T16:49:25","modified_gmt":"2025-08-08T21:49:25","slug":"executive-order-addresses-politicized-or-unlawful-debanking-by-financial-institutions","status":"publish","type":"insight","link":"https:\/\/www.mcguirewoods.com\/client-resources\/alerts\/2025\/8\/executive-order-addresses-politicized-or-unlawful-debanking-by-financial-institutions\/","title":{"rendered":"Executive Order Addresses \u201cPoliticized or Unlawful Debanking\u201d by Financial Institutions"},"content":{"rendered":"\n<p>On Aug. 7, 2025, President Donald Trump issued an <a href=\"https:\/\/www.whitehouse.gov\/presidential-actions\/2025\/08\/guaranteeing-fair-banking-for-all-americans\/\" target=\"_blank\" rel=\"noreferrer noopener\">executive order<\/a> aimed at federal banking regulators and financial institutions to address what the order defines as \u201cpoliticized or unlawful debanking\u201d based on political or religious beliefs. The order follows public statements by the president accusing certain banks of discriminating against him personally.<\/p>\n\n\n\n<p>The order describes instances of \u201cunacceptable practices to restrict law-abiding individuals\u2019 and businesses\u2019 access to financial services on the basis of political or religious beliefs or lawful business activities.\u201d The order states that financial institutions at times engaged in these practices at the prompting of \u201cfederal banking regulators.\u201d The order is addressed to the Small Business Administration (SBA), as a guarantor of loans under various programs, and the member agencies of the Financial Stability Oversight Council \u2014 which includes the Federal Reserve Board (Fed), the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation (FDIC).<\/p>\n\n\n\n<p>The order includes directives aimed at \u201cpoliticized or unlawful debanking\u201d past and present.<\/p>\n\n\n\n<p><strong>Curtailing Regulatory Supervision Based on \u201cReputation Risk\u201d<\/strong><\/p>\n\n\n\n<p>For decades, federal banking regulators considered \u201creputation risk\u201d (also referred to as \u201creputational risk\u201d) an important component of bank supervision. More recently, critics have described this supervisory category as subject to misuse, including as a pretext for discrimination against disfavored political or religious views. Since the beginning of the new administration, the <a href=\"https:\/\/www.federalreserve.gov\/newsevents\/pressreleases\/bcreg20250623a.htm\" target=\"_blank\" rel=\"noreferrer noopener\">Fed<\/a>, <a href=\"https:\/\/www.occ.gov\/news-issuances\/bulletins\/2025\/bulletin-2025-4.html\" target=\"_blank\" rel=\"noreferrer noopener\">OCC<\/a> and <a href=\"https:\/\/www.fdic.gov\/news\/speeches\/2025\/view-fdic-update-key-policy-issues\" target=\"_blank\" rel=\"noreferrer noopener\">FDIC<\/a> have announced intentions to move away from reputation risk in bank supervision. The order builds on this trend by directing \u201ceach appropriate Federal banking regulator \u2026 [to] remove the use of reputation risk or equivalent concepts that could result in politicized or unlawful debanking \u2026 from their [supervisory] guidance documents, manuals, and other materials.\u201d<\/p>\n\n\n\n<p><strong>Using SBA Loan Programs to Require Financial Institutions to Identify and Redress Debanking<\/strong><\/p>\n\n\n\n<p>The order directs the SBA to issue, within 60 days, notices to covered financial institutions participating in SBA-guaranteed loan programs. These notices must inform the recipient financial institutions that they have 120 days to identify clients that have been denied service, access to financial services or access to payment processing services \u201cthrough a politicized or unlawful debanking action\u201d; to provide notice to such clients; and to reinstate them or provide them the \u201crenewed option to engage in such services previously denied.\u201d<\/p>\n\n\n\n<p><strong>Identifying Past or Current Debanking Practices for Regulatory Enforcement<\/strong><\/p>\n\n\n\n<p>The order directs each federal banking regulator, within 120 days, to review the financial institutions under its jurisdiction \u201cthat have had any past or current, formal or informal, policies or practices that require, encourage, or otherwise influence such financial institution to engage in politicized or unlawful debanking and to take appropriate remedial action.\u201d The order contemplates that enforcement actions might be brought under \u201csection 5 of the Federal Trade Commission Act (15 U.S.C. \u00a7 45), section 1031 of the Consumer Financial Protection Act (12 U.S.C. \u00a7 5531), and Equal Credit Opportunity Act (ECOA).\u201d<\/p>\n\n\n\n<p><strong>Addressing Religious Discrimination Under the Equal Credit Opportunity Act<\/strong><\/p>\n\n\n\n<p>The order also directs federal banking regulators to \u201creview their current supervisory and complaint data to identify any financial institution that has engaged in unlawful debanking on the basis of religion.\u201d The ECOA makes it \u201cunlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction \u2026 on the basis of \u2026 religion.\u201d 15 U.S.C. \u00a7&nbsp;1691(a). Agencies may enforce this prohibition administratively under \u00a7&nbsp;1691c. The order directs that, if agencies are unable to secure compliance this way, they should refer the matter to the Department of Justice for civil enforcement, as provided in \u00a7&nbsp;1691e(g).<\/p>\n\n\n\n<p><strong>Developing a Comprehensive Administration Strategy to Combat Debanking<\/strong><\/p>\n\n\n\n<p>The order directs the heads of the Department of Treasury and the National Economic Council to develop a \u201ccomprehensive strategy for further measures to combat politicized or unlawful debanking activities of financial regulators and financial institutions across the Federal Government, including consideration of legislative or regulatory options to eliminate such debanking.\u201d<\/p>\n\n\n\n<p class=\"has-text-align-center\">*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *<\/p>\n\n\n\n<p>The order is the latest step in the administration\u2019s effort to address financial institutions\u2019 perceived political bias. In April, the DOJ\u2019s Civil Rights Division <a href=\"https:\/\/www.justice.gov\/usao-edva\/pr\/us-attorney-announces-launch-task-force-combat-illegal-debanking-eastern-district\" target=\"_blank\" rel=\"noreferrer noopener\">announced<\/a> the Equal Access to Banking Task Force, which includes the U.S. Attorney\u2019s Office for the Eastern District of Virginia and the Office of the Virginia Attorney General. The joint task force is charged with investigating allegations that individuals or entities were refused access to banking services on the basis of \u201cpolitical views, religious beliefs, or lawful activities.\u201d The task force encouraged those who believe they are victims of debanking to submit tips directly to the task force\u2019s email or through the Civil Rights Division\u2019s complaint portal.&nbsp;<\/p>\n\n\n\n<p>The order is in line with other initiatives for \u201cfair access\u201d to banking services. In the final days of the first Trump administration, the OCC issued <a href=\"https:\/\/www.occ.gov\/news-issuances\/news-releases\/2021\/nr-occ-2021-8.html\" target=\"_blank\" rel=\"noreferrer noopener\">final rules<\/a> requiring large banks to ensure fair access to banking services and mandating that risk assessments should be individualized rather than categorical. The Biden administration halted the rule, but in 2023, the Department of Treasury issued guidance on its own \u201cderisking strategy\u201d that similarly called for individualized, rather than categorical, risk management practices. As noted above, the Fed, the OCC and the FDIC took steps earlier this year to remove references to reputation risk from their supervisory guidance.<\/p>\n\n\n\n<p>Debanking also has been a subject of congressional scrutiny. The Senate Banking Committee, led by Chairman Tim Scott (R-S.C.), <a href=\"https:\/\/www.banking.senate.gov\/hearings\/investigating-the-real-impacts-of-debanking-in-america\" target=\"_blank\" rel=\"noreferrer noopener\">held a hearing<\/a> in February titled \u201cInvestigating the Real Impacts of Debanking in America.\u201d Following the hearing, the committee reported out favorably the Financial Integrity and Regulation Management Act, which \u2014 like the executive order \u2014 would prohibit federal banking regulators from considering \u201creputational risk\u201d in any of their supervisory activities of banks, including any \u201cguidance, rule, examination manual, or similar document.\u201d<\/p>\n\n\n\n<p>Last Congressional session, the House Judiciary Committee and its former Select Subcommittee on the Weaponization of the Federal Government conducted a lengthy investigation into debanking practices. The investigation resulted in a 47-page <a href=\"https:\/\/judiciary.house.gov\/sites\/evo-subsites\/republicans-judiciary.house.gov\/files\/2024-12\/2024-12-05-Financial-Surveillance-in-the-United-States.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">staff report<\/a> detailing the committee\u2019s and subcommittee\u2019s findings that the FBI and the Department of Treasury\u2019s Financial Crimes Enforcement Network manipulated financial institutions to serve as \u201c<em>de facto<\/em> arms of law enforcement\u201d by requiring heavy monitoring and reporting of customers\u2019 financial activities under the Bank Secrecy Act and Section 314 of the Patriot Act.<\/p>\n\n\n\n<p>Several states also passed \u201cfair access\u201d legislation to prohibit discrimination in banking access based on political or religious affiliation. <a href=\"https:\/\/www.flsenate.gov\/Session\/Bill\/2023\/3\/BillText\/er\/PDF\" target=\"_blank\" rel=\"noreferrer noopener\">Florida law<\/a>, for example, prohibits denying or canceling banking services to current or prospective customers based on their political opinions, religious beliefs, \u201ca social credit score based on certain factors\u201d or other factor that is not \u201ca quantitative, impartial, and risk-based standard.\u201d Florida requires that covered financial institutions <a href=\"https:\/\/www.flsenate.gov\/Session\/Bill\/2024\/989\/BillText\/er\/PDF\" target=\"_blank\" rel=\"noreferrer noopener\">annually attest<\/a> to their compliance and \u2014 like the federal task force \u2014 has a process for customers to submit complaints of debanking for further investigation. Tennessee passed a <a href=\"https:\/\/legiscan.com\/TN\/text\/HB2100\/id\/2990956\/Tennessee-2023-HB2100-Chaptered.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">similar law<\/a> in 2024, and other states are considering similar legislation.<\/p>\n\n\n\n<p>In light of the climate of government scrutiny around debanking, financial institutions may consider it prudent to review policies or practices that could be perceived as discriminatory based on political ideology, speech or religious beliefs. The executive order affirms the regulatory principle that \u201c[b]anking decisions must instead be made on the basis of individualized, objective, and risk-based analyses.\u201d Financial institutions should anticipate that the order may lead not only to increased scrutiny from prudential regulators but also increased attention from the private plaintiff\u2019s bar.<\/p>\n\n\n\n<p>McGuireWoods has extensive experience representing financial institutions before federal banking regulators, the Department of Justice, Congress and state attorneys general, including with respect to allegations of debanking. The firm\u2019s <a href=\"https:\/\/www.mcguirewoods.com\/services\/practices\/government-investigations-white-collar-litigation\/\">Government Investigations &amp; White Collar Litigation<\/a> and <a href=\"https:\/\/www.mcguirewoods.com\/services\/practices\/banking-regulation-enforcement\/\">Banking Regulation &amp; Enforcement<\/a> Practice Groups are nationally recognized and offer experienced, trusted counsel to clients facing high-stakes government investigations, enforcement actions and related litigation. For questions about compliance with this executive order or how recent government actions mentioned in this article affect financial institutions, contact the authors.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>On Aug. 7, 2025, President Donald Trump issued an executive order aimed at federal banking regulators and financial institutions to address what the order defines as \u201cpoliticized or unlawful debanking\u201d&#8230;<\/p>\n","protected":false},"author":5,"featured_media":0,"template":"","tags":[3705],"industry_tax":[],"insight_type":[2331],"international_tax":[],"location_tax":[],"media_role":[],"people_tax":[939,2073,2063,2005,1808,1157,1120,972,852],"practice_tax":[4231,210,188,156,133,127,124,108,102],"publication_type":[],"site_tax":[2],"class_list":["post-90503","insight","type-insight","status-publish","hentry","tag-trump","insight_type-alerts","practice_tax-trading-markets-compliance-enforcement","practice_tax-banking-regulation-enforcement","practice_tax-government-investigations-white-collar-litigation","practice_tax-political-campaign-finance","practice_tax-state-ag-investigations","practice_tax-bsa-aml-counseling-defense","practice_tax-consumer-financial-services-litigation","practice_tax-financial-services-litigation","practice_tax-congressional-investigations"],"acf":[],"links_out":[],"links_in":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO 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