What Happened?
U.S. President Donald Trump is preparing to sign an executive order to prevent large banks from arbitrarily closing customer accounts due to political or religious beliefs. Trump personally revealed that he is a victim of this “politically motivated account closure,” directly bringing the conflict between the White House and Wall Street to the forefront.
This order is a significant boon for the cryptocurrency industry, which has long been shut out by banks. It prohibits banks from refusing services under ambiguous “reputational risk” claims, potentially addressing the fundamental “bank access” issue faced by cryptocurrency companies, significantly enhancing their operational stability and legitimacy within the industry.
Although this move can provide immediate assistance to specific groups, it also politicizes financial regulation. This not only introduces uncertainty into the market but may also set a precedent for future governments to intervene in banks’ commercial decisions using similar methods. Banks may, in an effort to avoid complications, tighten their scrutiny of high-risk clients, the implications of which remain to be seen.
Can Banks Close Your Accounts Just Because They Dislike You?
The White House is preparing to address the “discrimination” controversy surrounding large banks. Reports indicate that some banks refuse service to customers based on their political stance (for example, conservative) or industry type (such as cryptocurrency). To tackle this issue, The Wall Street Journal reports that President Trump is ready to sign a robust executive order that explicitly warns all financial institutions that if they dare to exclude customers for “political reasons,” the government will impose penalties.
Furthermore, Trump has publicly criticized financial giants like JPMorgan Chase and Bank of America, accusing them of having refused to serve him in the past due to political factors.
In an interview with foreign media outlet CNBC, Trump candidly shared his personal experience. He stated, “The banks completely discriminate… I think my discrimination may be more severe, but they do discriminate against many conservatives.”
Trump detailed how, after the end of his first presidential term, he attempted to deposit hundreds of millions of dollars in cash into JPMorgan Chase, only to be told, “We are sorry, sir, we cannot serve you. You have 20 days to sort this out.”
He indicated that he then tried to make a deposit at Bank of America, but was similarly rejected. Ultimately, he had to spread his funds across various small banks nationwide.
He remarked, “I had to place money everywhere, ten million dollars here, ten million dollars there; this is just insane. The banks seriously discriminated against me, even though I have always been very good to them.”
Trump believes that the banks’ refusal to accept his deposits results from the Biden administration encouraging regulators to “destroy Trump,” although he did not provide concrete evidence.
According to drafts of the executive order seen by The Wall Street Journal and Reuters, the order will directly require banking regulators to investigate whether the actions of financial institutions violate laws that protect customer rights, such as the Equal Credit Opportunity Act, antitrust laws, or consumer financial protection laws. The draft also clearly states that if banks are found to be in violation, they will face severe consequences, including fines, signing “consent orders,” or other disciplinary actions.
According to sources cited by Reuters, Trump may officially sign this order as early as the 7th.
Bank Responses and Core Controversy: “Reputational Risk”
In response to Trump’s accusations, JPMorgan Chase did not directly address the claims regarding Trump’s personal accounts but stated, “We do not close accounts for political reasons. We agree with President Trump that regulatory reform is urgently needed. We commend the White House for addressing this issue and look forward to collaborating with them to resolve it properly.”
Bank of America also expressed welcome for the government’s efforts to provide regulatory clarity, stating, “We have provided detailed proposals and will continue to work with the government and Congress to improve the regulatory framework.”
Moreover, U.S. bankers generally believe that the core of the “politically motivated account closure” controversy lies in regulators’ “reputational risk” assessments.
During the Biden administration, regulators review the decisions banks make based on the “reputational risk” associated with their customers, putting pressure on banks when dealing with controversial clients (such as gun manufacturers, cryptocurrency companies, or political figures). Banks assert that their decisions are based on legal, regulatory, or financial risks (such as anti-money laundering regulations), rather than political stances. The industry organization, the Bank Policy Institute, further points out that the core issue is “over-regulation and regulatory discretion.”
After Trump took office, the Federal Reserve announced in June that it would no longer consider “reputational risk” as a factor in reviewing banks.
What Impacts Will Signing This Order Bring?
In addition to directing financial regulatory agencies, the draft also requires the Small Business Administration (SBA) to review the partner banks it provides loan guarantees to, and mandates regulators to refer potential violations to the Attorney General in certain cases.
The U.S. Department of Justice announced in April that it has established a special task force in Virginia to specifically review allegations of banks denying customer credit or services based on “prohibited factors.”
If Trump’s executive order is indeed signed, it will have significant impacts.
First, it will impose immediate compliance pressures and costs on the banking industry, requiring financial institutions to thoroughly review internal policies to ensure that all decisions to refuse or terminate customer relationships are supported by legitimate business reasons, rather than relying on vague “reputational risk” claims.
For conservative groups, cryptocurrency companies, or other specific industries that have long perceived themselves as unfairly treated, this order provides a crucial relief channel, addressing one of the fundamental pain points of “bank access” for the cryptocurrency industry, marking a key step towards financial mainstreaming.
It offers the industry a “fair chance at competition,” but does not exempt it from all scrutiny. In the future, whether cryptocurrency-related industries can truly gain access to banking services will depend more on the companies’ own compliance capabilities and risk management standards.
References: WSJ, Reuters