Debanking is happening, and it’s worse than people realize.
Though often misunderstood, this phenomenon—whereby financial institutions, under federal regulatory pressure, deny services to individuals or groups for ideological reasons—has become a flashpoint for conservatives.
Fortunately, just this year, both JPMorgan Chase and Citigroup announced they would halt their respective debanking practices relating to religious and political reasons. Yet Regions Bank—headquartered right here in Alabama—hasn’t expressed that commitment.
Meanwhile, when legislation addressing debanking was introduced in the Alabama Legislature—of all places—it went nowhere. That’s likely due to a widespread and dangerous misconception: that addressing debanking through legislation amounts to government meddling in private business.
A new white paper from the America First Policy Institute (AFPI) exposes the flaw in that misunderstanding. It refers to “government-driven debanking,” underscoring that it’s primarily public-sector coercion—not free markets—pushing banks to target conservative individuals and organizations.
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Before diving into the details of the white paper, let’s acknowledge that the banking industry does not operate in anything resembling a true free market. Major financial institutions benefit from federal deposit insurance, privileged access to the Federal Reserve as favored lenders, and the ever-lurking promise of taxpayer-funded bailouts for those deemed “too big to fail.”
These protections amount to a government backstop, one that fundamentally distorts the competitive landscape and undermines the argument that banks are merely private actors operating independently of state influence.
Back to the white paper.
“Debanking,” it avers, “can be understood as federal regulators taking advantage of vague and overly broad regulations to advance their political agenda by trying to direct capital to and from certain businesses and individuals.” It notes that banking regulations are often broad and vague, allowing regulators to make decisions based on political rather than financial criteria.
Banks, in return, receive informal, ambiguous guidance but must aggressively comply to avoid severe penalties, including billion-dollar fines and criminal charges.
AFPI traces the roots of debanking to the Obama administration, when federal regulators began treating reputational risk—based on negative public opinion—as a factor in regulatory oversight, a shift that ultimately led to banks targeting conservatives.
The Department of Justice under President Obama notoriously launched Operation Choke Point, a program that effectively undermined Second Amendment rights by pressuring banks to sever ties with lawful firearm dealers.
Framed as a crackdown on fraud and money laundering, this initiative targeted entire industries—such as payday lenders, gun retailers, and others deemed “high risk”—not based on evidence of wrongdoing, but on reputational concerns and ideological disfavor. Financial institutions, fearing regulatory scrutiny, responded by denying services to businesses that were politically disfavored but legally compliant.
The Trump administration, during both its terms in office, has pushed back against these trends.
AFPI outlines a series of much-needed reforms to end the politicization of banking and restore fairness, objectivity, and transparency to the financial system. First, it recommends removing the use of “reputational risk” as a regulatory factor. Legislation such as the Financial Integrity and Regulation Management Act pending in Congress would ensure that financial institutions are evaluated solely by objective financial measures.
AFPI also recommends eliminating the “M” for “Management” in the CAMELS rating system, which currently gives regulators broad discretion to penalize banks for engaging with lawful but politically controversial industries. (CAMELS stands for “capital adequacy,” “asset quality,” “management,” “earnings,” “liquidity,” and “sensitivity to market risk.”)
Another key reform is the creation of a federal Fair Access standard that would prohibit financial institutions from making business decisions based on political considerations. Such a standard would prevent regulators from using informal pressure tactics and ensure that banks are guided by sound business judgment, not ideology.
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To further promote transparency and accountability, AFPI calls for requiring all supervisory guidance from regulators to be in writing and for banks to provide customers with written notice explaining account closures—subject to reasonable confidentiality constraints. This would prevent secretive debanking based on off-the-record regulatory nudges.
Finally, AFPI urges the modernization of outdated Anti-Money Laundering and Know Your Customer rules. These antiquated regulations are often used to justify closing accounts of legitimate cash-based businesses, charities, and digital asset firms, even when they commit no unlawful activity.
Worse, legal restrictions often prohibit banks from telling customers why their accounts were closed. Updating these rules would help ensure that financial crime prevention remains the focus rather than enabling debanking based on regulatory overreach or political pressure.
If banks are going to enjoy the immense privileges that come with government backing, they must also accept that they cannot operate as if they are entirely free of accountability. These institutions are not neutral market actors floating above public scrutiny; they exist within a framework of public trust and taxpayer support.
That reality justifies reasonable legal safeguards to ensure they do not wield their power in ways that punish political or ideological dissent. At the very least, the AFPI white paper acknowledges this tension and provides a thoughtful framework for alleviating banks from the regulatory pressures that initially incentivized debanking.
If policymakers are serious about restoring integrity and neutrality to the financial system, these reforms are a good starting point. Alabama lawmakers, in particular, should revisit stalled anti-debanking legislation in the next session and ensure that ideological discrimination has no place in our financial institutions.