On August 7, 2025, President Donald Trump issued an Executive Order entitled “Guaranteeing Fair Banking for all Americans” (EO). The EO broadly prohibits banks and other financial institutions from engaging in “politicized or unlawful debanking” – essentially, from restricting or denying credit, deposit, or other financial services to customers and potential customers based on “political or religious beliefs or lawful business activities.” It also instructs the federal banking regulators to remove from their supervisory guidance and other materials reputational risk and similar concepts that could cause politicized or unlawful debanking.
The EO includes various reporting, investigatory, and remediation requirements, as well as associated deadlines on particular agencies – notably, the federal banking regulators. The EO defines these regulators as the Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), National Credit Union Administration, Consumer Financial Protection Bureau (CFPB), and Small Business Administration (SBA). Recognizing that these regulators operate under pre-existing statutory requirements, the EO expressly states that it will not “impair or otherwise affect the authority granted by law to an executive department or agency, or the head thereof.” But, how many provisions of the EO will be effectuated in practice remains uncertain. The EO, however, signals the Trump Administration’s continued attention to the issue of access to banking and financial services without denial based on “constitutionally or statutorily protected beliefs, affiliations, or political views.”
A continued focus on debanking domestically and internationally
Debanking has been a key focus by the Trump Administration in a variety of contexts, reflecting both domestic and foreign political considerations. At home, the Federal Reserve and OCC had, prior to the EO, issued guidance removing reputation risk as a category of risks to be managed by supervised institutions and instructing bank examiners to no longer examine reputation risk. The newly confirmed head of the OCC, Jonathan Gould, noted his support for the EO, as did Travis Hill, Acting Chairman of the FDIC. The FDIC further indicated that it plans to take a similar step, while the Financial Integrity and Regulation Management Act would, if enacted, also seek to largely prohibit supervisory consideration by the federal banking regulators of reputation risk.
As discussed in our prior alert, in March 2025, President Trump announced the end of “Operation Chokepoint 2.0” – the federal banking regulators’ reported practice of pressuring supervised banks to debank digital asset customers and effectively halt crypto-related activities by cutting off access to mainstream financial services. Even before the beginning of the second Trump Administration, in 2017, the Department of Justice (DOJ) committed to ending “Operation Chokepoint 1.0,” a government initiative that discouraged banks from providing accounts and financial services to certain disfavored companies ranging from payday lenders to gun retailers to indirectly stifle them through deprivation of access to mainstream banking.
Internationally, the lines between sanctions, de-risking, and debanking have blurred, particularly alongside the Trump Administration’s heightened invocation of sanctions, anti-money laundering, and other authorities to achieve US strategic and national security objectives. For instance, in June 2025, the Department of the Treasury (Treasury) implemented the Trump Administration’s pledge of ensuring the “total elimination” of certain drug cartels and transnational criminal organizations by designating three large Mexican financial institutions as being of “primary money laundering concern” in connection with illicit opioid trafficking. As a result of that action, US banks and other covered financial institutions were ordered to cease all future transmittals of funds by the three institutions (and their Mexican branches, subsidiaries, and other offices), and this remains an area of ongoing attention for the Trump Administration.
Details of the EO
Citing certain past practices, such as Operation Chokepoint, the EO states that US consumers and businesses should not be denied access to financial services based on their political or religious beliefs or lawful business activities, many of which are constitutionally or statutorily protected. The EO directs the federal banking regulators to eliminate politicized or unlawful debanking practices. Financial services broadly includes loans, deposit accounts (including access to them and their terms and conditions), and “other banking products or financial services.”
The EO contains four major components, as outlined below.
1. Financial banking regulator review of supervised financial institutions’ debanking practices – with potential for enforcement actions and civil liability
Significantly, following the EO, financial institutions could face enforcement actions, and even civil liability, if the federal banking regulators or DOJ determine that they have engaged in political or unlawful debanking practices – whether such practices are informal or formal and whether they have occurred before or may occur after the EO’s issuance. The federal banking regulators are tasked, within 180 days of the EO, to identify financial institutions subject to their respective jurisdictions that have engaged in such practices in violation of applicable law.
These laws expressly include (1) Section 5 of the Federal Trade Commission Act, which prohibits ‘‘unfair or deceptive acts or practices in or affecting commerce;’’ (2) Section 1031 of the Consumer Financial Protection Act, which prohibits unfair, deceptive, or abusive acts or practices in connection with consumer financial products and services; and (3) the Equal Credit Opportunity Act (ECOA). To the extent the federal banking regulators determine that any supervised financial institution has violated these or other applicable laws by having committed any political or unlawful debanking practices, such regulators are instructed to take appropriate remedial action. This includes “levying fines, issuing consent decrees, or imposing other disciplinary measures.”
Special action is required with respect to any unlawful debanking practice taken “on the basis of religion.” Within 180 days of the date of the EO, the federal banking regulators are charged with determining whether such conduct by any financial institution has occurred. Those financial institutions having engaged in unlawful debanking on the basis of religion are required to comply with the relevant portions of ECOA. If they fail to do so, the relevant federal banking regulator is instructed to refer the matter of noncompliance to the Attorney General “for appropriate civil action.”
Implementing the EO could pose challenges for the federal banking regulators, particularly in the context of large banks. For example, the CFPB has exclusive supervisory authority over the largest banks (greater than $10 billion in assets) with respect to the ECOA. Regulators may focus their attention on laws surrounding unfair, deceptive, and abusive acts or practices (UDAAP), which are typically invoked to stop conduct that is not directly addressed by other laws. For example, regulators may conclude that it is “unfair” to debank someone because of their political affiliation (conduct that is not prohibited by ECOA).
2. Removal of reputation risk as a category for federal banking regulator use
The EO strikes reputation risk as a distinct category of risk assessed by federal banking regulators. The EO instructs regulators to remove (to the extent they have not already done so), within 180 days of the date of the EO, all references in guidance, supervisory manuals, and other materials – other than existing regulations – to reputation risk (or similar concepts) that could result in political or unlawful debanking. The federal banking regulators are required to consider rescinding or changing existing regulations that could result in debanking so that reputation is considered “solely to the extent necessary to reach a reasonable and apolitical risk-based assessment.” Supervised financial institutions may expect further clarifications by guidance and, potentially, regulations in this area.
Notably, however, the EO itself does not purport to expressly require the supervised financial institutions themselves to make changes to their reputation risk frameworks – other than as may draw enforcement action or other sanction by regulators. It also does not explicitly identify behaviors that constitute political or unlawful debanking for reputation risk and other purposes. Rather, the EO refers to financial services restrictions placed because of a “customer’s political or religious beliefs ... or lawful business activities that the financial service provider disagrees with or disfavors,” again, on “political” grounds. Debanking actions by financial institutions taken for other reasons, such as adverse market impact or unfavorable media attention, could arguably exist in a gray zone, potentially presenting compliance challenges. The EO does, however, define appropriate and permissible criteria for decision-making on banking and financial products, namely “individualized, objective, risk-based standards.”
3. SBA review of loan guarantee programs for small businesses and remediation by participating financial institutions
The EO includes several requirements for the SBA, which is charged by statute with overseeing various loan and other financial assistance programs for qualifying small businesses. Within 60 days of the date of the EO, the SBA must notify all financial institutions for which it “guarantees loans under its lending programs” that these institutions are to:
a. Make reasonable efforts to identify and reinstate within 120 days of the date of the EO any previous clients (including their subsidiaries) denied service through a politicized or unlawful debanking practice in violation of the SBA’s lending statute or its policies or procedures relating to its Office of Capital Access – and notify any victims of reinstatement – and
b. Identify within 120 days of the date of the EO all potential clients (including their subsidiaries) denied access either to financial services or payment processing services through politicized or unlawful debanking practices similarly in violation of the SBA’s relevant authorities and notifying them of such denied services, together with the “renewed option to engage in such services previously denied.”
Because the EO defines the SBA as one of the federal banking regulators otherwise instructed to take enforcement actions for political or unlawful debanking practices, these requirements for affirmative remediation are additive. Nonetheless, the EO makes clear that it leaves existing appropriations in place and does not create any legal right for small businesses or anyone else potentially damaged by these practices.
4. Treasury strategy to combat politicized or unlawful debanking
The EO also directs the Treasury Secretary, in consultation with the Assistant to the President for Economic Policy, to develop within 180 days of the date of the EO a comprehensive strategy to combat political or unlawful debanking by both financial regulators and financial institutions. The required strategy must consider any legislation or regulations to achieve this objective.
Compliance steps for financial institutions
Banks, credit unions, and other supervised financial institutions may anticipate an evolving supervisory, examination, and enforcement environment. The EO’s explicit focus on “politicized or unlawful debanking” and express renunciation of reputational risk as an independent supervisory metric may signal a material shift in supervisory expectations. Further, because the EO mandates that prior actions are subject to scrutiny, institutions could face additional regulatory exposure. There may also be litigation risk arising from the DOJ, certain states attorneys general, and private litigants focused on past and current debanking activity. As a result, supervised institutions may wish to consider the below steps.
- Institutions that historically have relied on reputational risk analyses when declining or terminating relationships are encouraged to re-examine such frameworks going forward. They may seek to ensure that future decisions to deny or restrict services are grounded in demonstrable safety-and-soundness, credit, or legal-compliance concerns untethered from potentially subjective reputational judgments. Decisions and programs that have or will apply “individualized, objective, risk-based standards” meet the expectations of the EO.
- Although the EO does not, by itself, create a private right of action, the mandated reviews, remedial directives, and referral mechanisms furnish regulators – and the DOJ – with fresh bases for examinations, enforcement activity, and potential civil litigation. Financial institutions’ previously terminated customers, or previously denied applicants of financial services, could assume, perhaps incorrectly, that they have a basis for claims or complaints against those institutions in reliance on the EO. Parallel obligations imposed on the SBA, coupled with the Treasury’s mandate to publish a comprehensive anti-debanking strategy, further broaden the universe of agencies that may scrutinize account-closure or service-denial decisions.
Institutions are encouraged to:
- Catalog historical off-boarding and service-denial data, with particular attention to (a) any decisions implicating political or religious factors, (b) whether such action was directed by state or federal banking regulators, and (c) instances in which the applicant or customer alleged such implication
- Refresh written policies to consider revising references to reputation risk or similar concepts in favor of criteria empirically tied to other recognized risk categories;
- Develop governance protocols that document, in real time, the permissible risk-based rationale for relationship decisions
- Manage customer relationships involving potential risk factors through clear communications and documentation, and
- Train relationship managers, underwriters, and compliance personnel on the institutions’ expectations in this evolving legal landscape.
- Until the scope and durability of those changes are clarified, cautious – but proactive – engagement with examiners and affected customers may be key.
- By undertaking a deliberate, document-driven review ahead of time, financial institutions may be better positioned to both demonstrate good-faith compliance during forthcoming supervisory reviews and mitigate the risk of becoming early test cases under the EO’s enhanced enforcement regime.
Conclusion
The EO marks the Trump Administration’s further scrutiny of reputation risk and debanking practices and imposes obligations on regulators, lawmakers, and financial institutions themselves in this area. Although the EO does not supersede existing laws, financial institutions can expect additional focus on these issues in the supervisory environment. Proactive efforts to address this evolving issue paired with documentation of the bases for decision making will be key to avoiding regulatory and other scrutiny.
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