President Trump’s Executive Order Seeks to Guaranty Fair Banking for Americans

On August 7, President Trump signed an Executive Order (the “Order”) aimed at financial institutions and intended to prevent unlawful “debanking,” which the order defines as denying an individual access to financial services based on the individual’s constitutionally protected beliefs, affiliates, or political views. The Order requires that any decision to deny access to financial services must instead be based on “individualized, objective, and risk-based analyses.”

Among the examples of impermissible “debanking” conduct engaged in by financial institutions cited by the order include flagging individuals making transactions related to companies like “Cabela’s” and “Bass Pro Shop” or sending peer-to-peer payments involving terms like “MAGA” and “Trump.” The Order also references “Operation Chokepoint” a now infamous federal operation to discourage banks from providing services to certain industries.

The Order has broad implications for banks, credit unions, savings associations, and other financial services providers as well as the prudential banking regulators. Among other things, the Order requires the following:

• The Order requires regulators to, within 180 days of the order, remove reputational risk concepts from any guidance documents, manuals, and other materials used to regulate or examine financial institutions.
• The Order directs regulators to, within 120 days of the Order, review and identify financial institutions with any past or current policies or practices, formal or informal, to engage in politicized or unlawful debanking and take enforcement action against such institutions, including by levying fines, issuing consent decrees, or imposing other disciplinary measures.
• The Order states that, within 180 days of the Order, the Secretary of the Treasury, in consultation with the Assistant to the President for economic policy, must develop a comprehensive strategy for further measures to combat politicized or unlawful debanking activities.

While the long-term impacts of the Order are unclear, there is no doubt that banking regulators in particular will be under pressure to identify and punish the types of debanking conduct identified in the Order. Financial institutions should therefore, in the short term, be prepared for examination questions and procedures aimed to identify “debanking” activities.

A copy of the Order can be found here.