What Happened?
U.S. President Trump is preparing to sign an executive order that would prevent major banks from closing customer accounts without justification based on political or religious reasons. Trump has personally revealed that he is a victim of such “political supply cuts,” bringing the conflict between the White House and Wall Street into the open.
This order represents a significant benefit for the cryptocurrency industry, which has long been shut out by banks. It prohibits banks from refusing services on vague grounds of “reputational risk,” potentially resolving the fundamental issue of “bank access” for cryptocurrency companies, thereby greatly enhancing their operational stability and the industry’s legitimacy.
While this move can immediately assist certain groups, it also politicizes financial regulation further. This not only brings uncertainty to the market but may also set a precedent allowing future governments to intervene in banks’ business decisions through similar means. Banks might, in an effort to avoid trouble, tighten scrutiny on high-risk customers, leaving the implications still to be observed.
Can Banks Close Your Account Just Because They Dislike You?
The White House is preparing to address the controversy of “discrimination” among major banks. Reports suggest that some banks refuse to service customers due to their political stance (such as conservative views) or industry type (like cryptocurrency). To tackle this issue, The Wall Street Journal reports that President Trump is ready to sign a powerful executive order. This order will explicitly warn all financial institutions that if they dare to deny service to customers for “political reasons,” the government will impose penalties.
Furthermore, Trump has publicly singled out financial giants such as JPMorgan Chase and Bank of America, accusing them of refusing to provide him service due to political factors in the past.
In an interview with CNBC, Trump candidly shared his personal experiences, stating, “The banks completely discriminate… I think my discrimination might be worse, but they indeed discriminate against many conservatives.”
Trump detailed that after his first presidential term ended, he attempted to deposit hundreds of millions of dollars in cash into JPMorgan Chase but was told, “Sorry, sir, we cannot service you. You have 20 days to sort it out.”
He mentioned that he then tried to deposit the money into Bank of America, but was similarly refused. Ultimately, he had to spread his funds across various small banks nationwide.
He said, “I placed the money everywhere, ten million here, ten million there, which is just crazy. The banks severely discriminated against me, even though I have always treated them well.”
Trump believes that the banks’ refusal of his deposits is a result of the Biden administration encouraging regulatory agencies to “destroy Trump,” although he did not provide specific evidence for this claim.
According to drafts of the executive order seen by The Wall Street Journal and Reuters, the order will directly require banking regulatory bodies to investigate whether financial institutions’ actions violate laws protecting customer rights, such as the Equal Credit Opportunity Act, antitrust laws, or consumer financial protection laws. The draft also clearly states that once a bank is found to be in violation, it will face severe consequences, including fines, signing “consent orders,” or other disciplinary actions.
According to insiders speaking to 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 claims regarding Trump’s personal account 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 working with them to find a proper resolution.”
Bank of America also welcomed 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.”
Bankers in the U.S. generally believe that the core of the “political supply cut” controversy lies in the evaluation of “reputational risk” by regulatory agencies.
During the Biden administration, regulatory bodies scrutinize banks’ decisions made due to “reputational risk” stemming from customers, putting pressure on banks when dealing with controversial clients (such as gun manufacturers, cryptocurrency companies, or political figures). Banks insist their decisions are based on legal, regulatory, or financial risks (such as anti-money laundering regulations), rather than political positions. The industry organization Bank Policy Institute pointed 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” in assessing banks. Wells Fargo analyst Mike Mayo pointed out, “The White House is telling banks not to use regulation as an excuse to refuse loans or banking relationships.”
What Effects Will Signing Bring?
In addition to directing financial regulatory agencies, this draft also requires the Small Business Administration (SBA) to review the partner banks providing loan guarantees, and requests that regulatory agencies submit potential violations to the Attorney General in certain circumstances.
The U.S. Department of Justice announced in April that it had established a special task force in Virginia to review allegations that banks were refusing customer credit or services based on “prohibited factors.”
If Trump’s executive order is indeed signed, it will have significant implications.
First, it will impose immediate compliance pressure 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 based on sound business reasons, rather than vague “reputational risk” excuses.
For conservative groups, cryptocurrency companies, or other specific industries that have long felt unfairly treated, this order provides an important avenue for relief and addresses one of the cryptocurrency industry’s fundamental pain points regarding “bank access,” marking a key step towards financial mainstreaming.
It offers the industry a “fair chance to compete,” but it does not exempt them from all scrutiny. In the future, whether cryptocurrency-related industries can truly obtain banking services will depend more on the companies’ own compliance capabilities and risk management standards.
References: wsj, reuters