Why Banks Need To Act Now on Debanking Risk

A sweeping executive order could redefine how financial services organizations manage risk, reputation, and account closures. This is the moment to confirm that your practices are defensible and compliant.

The White House is preparing to issue an executive order that targets banks and other financial services organizations accused of debanking customers based on their political or religious beliefs. According to reports on a draft of the order, regulators including the U.S. Department of Justice (DOJ), the Consumer Financial Protection Bureau, and supervisory agencies will be directed to investigate whether any financial services organizations have violated the Equal Credit Opportunity Act, antitrust laws, or consumer protection statutes in their account closure or service denial decisions.

This shift follows years of suggestions from conservative groups and crypto asset companies claiming that banks shut them out based on ideological grounds. Banks, meanwhile, have maintained that these actions were driven by legitimate concerns, namely compliance obligations under anti-money laundering, sanctions, or reputational risk frameworks. Now, it seems the regulatory environment is shifting, and organizations will need to ensure their practices can withstand intense scrutiny.

The executive order reportedly instructs regulators to dig into past account closure decisions and determine if “impermissible factors,” such as political or religious affiliation, played a role. The DOJ may be empowered to pursue enforcement actions, including fines, consent decrees, or criminal referrals. The order also directs the Small Business Administration to evaluate how lenders participating in its programs handle customer relationships with politically sensitive profiles. Of note, regulators might be required to eliminate internal policies that encourage or allow debanking on reputational risk grounds – a departure from past supervisory guidance. This change signals a regulatory pivot: Decisions must not only be risk-based, but also demonstrably neutral and legally defensible.

In response, banks should act now, not after a regulatory inquiry lands on their doorstep. First, organizations must conduct a comprehensive review of their onboarding and offboarding policies. Are account closures clearly documented and justified using objective, risk-based metrics? Are these decisions aligned with the Equal Credit Opportunity Act and fair lending expectations? If the rationale for terminating or denying services isn’t airtight, regulators might interpret the action as discriminatory, even if unintended. Banks might want to consider reevaluating their prohibited customer type lists and should look back several years to identify closure trends that might raise red flags. It will be critical to map exposure, spot potential patterns, and prepare documentation that shows how risk concerns are driving decision-making.

Next, organizations should get ahead of the regulators by proactively developing a compliance and engagement strategy. This strategy would include preparing talking points, internal review memos, and regulator-ready files to address possible inquiries. Rather than scramble later, banks should establish a clear, consistent framework now. A key priority is reevaluating how reputational risk is defined and applied, ensuring it cannot be construed as enabling ideological bias. Banks should audit existing practices, standardize customer decision processes, and assign executive oversight to ensure alignment. Taking these steps now can help position organizations to respond confidently and defensibly to future inquiries.

Equally critical will be achieving strong internal alignment across the organization. Organizations should update training programs for frontline staff, relationship managers, and risk officers to reinforce neutral, legally defensible standards for account servicing. They also should implement standardized procedures for documenting customer decisions and confirm consistency, transparency, and regulatory readiness. At the same time, banks should adopt clear, centralized messaging protocols for communicating service denials or account closures. Thoughtfully crafted language helps safeguard both the organization’s legal standing and its brand reputation, particularly in an environment of heightened political and regulatory scrutiny.

Ultimately for banks and other financial services organizations, this executive order is about compliance. Organizations don’t need to defend ideology; however, they need to ensure their practices are consistent, lawful, and clearly documented. With regulatory attention mounting, ensuring policies can withstand scrutiny isn’t optional. It’s essential.

Whether this executive order is signed tomorrow or later this year, the regulatory direction is clear: Regulatory scrutiny is increasing, and it is accompanied by the introduction of more stringent standards. Debanking is no longer just a talking point. It’s becoming a legal and reputational flashpoint. The banks that prepare now can stay out of the headlines later.

At Crowe, we help financial services organizations navigate uncertain terrain with targeted compliance audits, policy review and rewriting, regulatory strategy support, and litigation-readiness consulting. If your organization needs a readiness assessment or a policy strategy tailored to this shifting landscape, we’re here to help.