US bank regulator says large banks engaged in ‘debanking’ of disfavored industries

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By Pete Schroeder

WASHINGTON, Dec 10 (Reuters) – The nine largest U.S. banks in the past had placed restrictions on providing financial services to some controversial industries in a practice commonly described as “debanking,” the regulator overseeing large national banks said in a report released on Wednesday.

The Office of the Comptroller of the Currency began its review after President Donald Trump signed an executive order in August directing a regulatory review of all banks for any current or past practices that would effectively bar customers based on political or religious beliefs.

Without providing specific examples of wrongdoing at the banks, the OCC said its ongoing review found the firms all had policies that either refused services to some industries or required higher levels of scrutiny in excess of the actual financial risks from the years 2020 to 2023. 

“It is unfortunate that the nation’s largest banks thought these harmful debanking policies were an appropriate use of their government-granted charter and market power. While many of these policies were undertaken in plain sight and even announced publicly, certain banks have continued to insist that they did not engage in debanking,” Comptroller of the Currency Jonathan Gould said in a statement.

“Going forward, the OCC will hold banks accountable for these actions and ensure unlawful debanking does not continue,” Gould said.

The agency said its review remains ongoing and that it plans to hold the banks “accountable,” including potential referrals to the Justice Department.

The OCC said it plans to continue examining the matter, saying it is reviewing “thousands” of complaints for examples of debanking on the basis of political or religious beliefs.

The report did not provide specific examples, but said the firms examined were JPMorgan Chase , Bank of America , Citigroup , Wells Fargo , U.S. Bank , Capital One , PNC , TD Bank <TD.TO> and BMO Bank . The banks either declined to comment or did not respond to requests for comment.

The Bank Policy Institute, a trade organization for larger banks, said in a statement that banks want to provide services to as many customers as possible, and it welcomes any clarity from the government.

“The industry supports fair access to banking and is already working together with Congress and the administration to ensure banks are able to serve law-abiding customers,” the group said in a statement. “We also support recent regulatory efforts and clear and consistent standards that protect access to America’s banking system while maintaining sound risk management.”

The six-page report identified several industries that faced uphill climbs securing banking services, including oil and gas companies, cryptocurrency firms, tobacco and e-cigarette manufacturers, and firearm companies. The OCC said that many of these banks had publicly disclosed relevant policies, often tied to environmental, social and governance goals. The report also found some banks adopted heightened reviews for potential customers based on negative coverage in the media.

 Banks have come under increasing political pressure in recent years, particularly from conservatives, who argue the firms have improperly taken “woke” political stances in the past and some have effectively discriminated against certain industries, such as firearms or fossil fuels. That pressure has escalated during Trump’s second term, with the Republican president claiming in interviews that some banks refused to provide him services alongside other conservatives, a claim the banks have rejected.

U.S. regulators have also examined themselves to see if overly strict supervisory policies discouraged banks from providing services to certain sectors. All three major U.S. bank regulators this year have agreed to scrap the use of “reputational risk” by their examiners, which banks complained was often used to push them away from certain contentious industries.

(Reporting by Pete Schroeder; additional reporting by Saeed Azhar, Tatiana Bautzer, Nivedita Balu and Lananh Nguyen; Editing by Leslie Adler)