Senate committee debate over accountability for financial exclusion of certain entities
In the realm of banking, a significant issue has been gaining attention: de-banking. Banks terminate or deny services to individuals and businesses based on perceived legal, regulatory, reputational, or political risks, even in the absence of illegal activity. This practice, while largely the responsibility of banks, has been influenced by regulatory frameworks and an emphasis on reputational risk.
Recent regulatory actions aim to address this issue by reducing the role of reputational risk as an independent supervisory concern. In July 2025, the major U.S. federal bank regulators and the FDIC announced that they would no longer treat reputational risk as a standalone supervisory category, seeking to shift banks' focus back to core financial safety and soundness metrics [2].
The U.S. Treasury is also taking steps to protect customers from de-banking based on religious or political views. They plan to lead interagency consultations to define strategic policy directions that include vigilance against debanking motivated by political or religious discrimination [4].
Banks act on perceived risks shaped partly by regulatory emphasis, but regulators are now recalibrating their approaches to reduce de-banking and its discriminatory effects. By removing politicized reputational risk from supervision and encouraging more inclusive banking practices, regulators hope to foster a more equitable banking system [2][4].
| Aspect | Responsibility/Action | |----------------------------|-----------------------------------------------------------------------------------------------------------| | Who: | Banks primarily responsible due to decisions based on reputational and political risk concerns [1][2]. | | Role of regulators: | Regulators influenced banks by emphasizing reputational risk, but recent actions seek to reduce it [2]. | | Proposed regulatory actions: | Eliminating reputational risk as standalone supervisory factor, promoting financial stability, protecting growth and community banks, and preventing debanking due to political or religious reasons [2][4]. |
The debate over de-banking extends beyond regulatory circles. Sen. Elizabeth Warren has urged Treasury Secretary and Acting CFPB Director Scott Bessent to reconsider his decision to halt activity at the CFPB, arguing that it will impede efforts to stop de-banking [1]. Meanwhile, Sen. Thom Tillis has highlighted over-regulation as a contributing factor to de-banking de facto, with a lot of regulator-initiated de-banking going on [6].
In the private sector, Old Glory Bank was established to serve those who have been de-banked. The cryptocurrency industry, too, has claimed that the Federal Deposit Insurance Corp., under the Biden administration, ordered financial institutions to "de-bank" crypto firms [5].
As the issue of de-banking continues to evolve, it is clear that a multi-faceted approach, involving both banks and regulators, will be necessary to address this complex problem and ensure a more inclusive and equitable banking system for all.
[1] Sen. Elizabeth Warren warns that Treasury Secretary's decision to halt activity at the CFPB will impede efforts to stop de-banking. (Source: Bullet point 1) [2] Major U.S. federal bank regulators and the FDIC announce changes to reduce the role of reputational risk in supervision. (Source: Bullet points 2, 7, 8) [3] Nearly 12,000 de-banking related complaints have been filed by consumers in the past three years, with more than half of those complaints made against the four biggest U.S. banks. (Source: Bullet point 4) [4] U.S. Treasury emphasizes protecting customers from de-banking based on religious or political views and plans to drive financial regulatory policy centering on economic growth, Main Street interests, community bank viability, and national security. (Source: Bullet point 6) [5] The cryptocurrency industry claims the Federal Deposit Insurance Corp., under the Biden administration, ordered financial institutions to "de-bank" crypto firms. (Source: Bullet point 9) [6] Sen. Thom Tillis states that there is over-regulation leading to de-banking de facto, with a lot of regulator-initiated de-banking going on. (Source: Bullet point 10)
- The U.S. Treasury is actively working to protect customers from de-banking based on religious or political views, and is leading interagency consultations to formulate strategic policies against political or religious discrimination.
- Amidst the ongoing debate over de-banking, Sen. Elizabeth Warren has urged authorities to reconsider halting activity at the Consumer Financial Protection Bureau, arguing that it could hinder efforts to prevent de-banking.
