U.S. Banks Face Scrutiny Over Debanking Practices

WASHINGTON – A report from the Office of the Comptroller of the Currency (OCC) revealed that nine prominent U.S. banks have limited their financial services to certain industries deemed controversial. This practice, often referred to as “debanking,” is under review due to concerns about whether these restrictions are based on customers’ political or religious beliefs.

The OCC initiated its investigation after President Donald Trump issued an executive order in August. This order called for a thorough examination of banks’ current and past practices related to denying services based on political or religious grounds.

While the OCC did not detail specific instances of wrongdoing, it indicated that the banks typically had policies that either denied service to specific industries or imposed heightened scrutiny that didn’t align with actual financial risks from 2020 to 2023. Comptroller of the Currency Jonathan Gould expressed disappointment that major banks felt justified in applying such “demonetization policies” while wielding their bank charters and market power.

Going forward, the OCC plans to hold banks accountable, which may include referrals to the Justice Department. The agency continues its investigation, reviewing numerous complaints about banks terminating services due to political or religious reasons.

The report outlined industries notably affected, including oil, cryptocurrency, tobacco, and firearms. Moreover, banks appeared to struggle with fulfilling service requests from these sectors, often citing policies linked to environmental, social, and governance considerations. The investigation also found evidence that some banks were intensifying customer screenings in response to negative media reports.

Notably, conservatives have increasingly pressured banks, alleging that they have adopted “woke” positions and discriminated against certain industries like firearms and fossil fuels. This scrutiny intensified during Trump’s tenure, during which he claimed some banks had turned him away, a statement that the banks contested.

In response to these concerns, regulators have begun scrutinizing whether stringent supervisory policies might limit banks’ willingness to serve particular sectors. This year, the three major U.S. banking regulators agreed to cease using “reputational risk” in their examinations, a term banks claimed had influenced their decisions against certain controversial industries.

The Banking Policy Institute, representing major banks, stated that the industry aims to serve all customers and supports fair access to banking, affirming its commitment to regulatory efforts that safeguard access while managing risk.