In a move to address concerns about financial institutions denying services based on non-financial factors, the president issued an executive order on Thursday aimed at preventing what he describes as “debanking.” The order specifically instructs federal regulators to remove “reputational risk” as a basis for evaluating financial institutions and to scrutinise consumer complaint data for evidence of discrimination, particularly on religious grounds.
Executive order details
The executive order directs financial regulators, including the Treasury Secretary and the heads of the Federal Reserve and the Office of the Comptroller of the Currency, to take specific actions. The first key directive is to revise rules and guidance to ensure that “reputational risk” is no longer a factor in supervisory examinations. Historically, financial institutions have sometimes cited reputational risk as a reason for declining to do business with certain individuals or organisations, such as those in politically sensitive industries or with controversial views. The administration argues that this practice has been used as a pretext for discrimination.
Reviewing complaint data
A second major component of the order is the mandate for regulators to review complaint data. The order requires a detailed analysis of all consumer and business complaints related to banking services, with a specific focus on identifying instances of debanking based on religion. This directive follows a period where some religious organisations and individuals have claimed they were unfairly denied access to banking services. The administration aims to determine the extent of this issue and to establish a clear policy to prevent it.
Implications for financial institutions
For financial institutions, the executive order signals a significant shift in regulatory priorities. By removing reputational risk as a formal supervisory concern, the order could reduce the perceived pressure on banks to avoid clients who may be seen as controversial. It may also lead to a more prescriptive approach from regulators regarding which clients banks must serve, as long as they meet standard financial and legal criteria. The industry will likely need to update its internal policies and training to align with the new guidance.
Political and economic context
This executive order is part of a broader push by the Trump administration to address what it views as the overreach of corporate and financial power. The move is popular with some segments of the president’s political base who feel they have been unfairly targeted by financial institutions due to their beliefs or associations. Opponents, however, have raised concerns that the order could weaken banks’ ability to manage risk and could potentially force them to do business with entities involved in legally or ethically questionable activities, thereby increasing the risk of money laundering or other financial crimes. The full impact of the order will depend on how rigorously federal regulators implement its directives.
REFH – Newshub, August 12, 2025
