Trump Signs Executive Order Banning ‘Debanking’ Over Political or Religious Beliefs

U.S. President Donald Trump has signed an executive order prohibiting banks from denying services to individuals or businesses based on political or religious beliefs.

This order directs federal bank regulators to review supervised institutions for any current or past practices that could amount to discrimination on these grounds. Regulators are instructed to examine firms for discriminatory activities and review their own internal policies within 180 days.

The Order directs the Small Business Administration (SBA) to require venture capital investment firms under its jurisdiction to take measures to reinstate clients and potential clients who were denied services due to unlawful debanking. This aims to give affected people and businesses fair access to banking.

The measure also formalizes the removal of reputational risk in bank supervision and updates relevant guidance and examination manuals. This risk category, criticized by Republicans as overly subjective, allowed regulators to pressure banks to avoid certain clients or sectors due to potential negative publicity. Trump’s order calls for this principle to be dropped entirely, arguing that banking decisions should be based only on “material, measurable, and justifiable risks.”

“Financial institutions have engaged in unacceptable practices to restrict law-abiding individuals’ and businesses’ access to financial services on the basis of political or religious beliefs or lawful business activities,”

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Trump has personally claimed to be a victim of discrimination. In a CNBC interview earlier this week, he alleged without evidence that JPMorgan Chase and Bank of America refused to accept his deposits after his first term in office. JPMorgan has denied closing accounts for political reasons, while Bank of America has said it would welcome clearer regulatory guidance.

The executive order also accuses some financial institutions of participating in “government-directed surveillance programmes” targeting conservatives after the January 6, 2021, attack on the U.S. Capitol.

Banking industry groups have largely welcomed the move. In a joint statement, the Bank Policy Institute, American Bankers Association, Consumer Bankers Association, and Financial Services Forum thanked the administration for addressing “regulatory overreach” and said the order could provide much-needed clarity.

“It’s in banks’ best interest to take deposits, lend to, and support as many customers as possible. Unfortunately, regulatory overreach, supervisory discretion, and a maze of obscure rules have stood in the way,” the statement read.

The order also allows regulators to refer certain cases to the Department of Justice for potential civil action, adding a legal enforcement mechanism to the policy shift. How regulators interpret and implement the directive in practice remains to be seen.

While the executive order removes “reputational risk” from bank supervision, the shift places even greater responsibility on institutions to demonstrate that their decisions are based on measurable, defensible criteria. This means financial institutions will need to lean more heavily on robust, accurate, and defensible AML screening practices to justify onboarding and account retention decisions, especially as regulatory reviews become more stringent.