New AFPI Research Report Outlines Solutions to Rein in Government-Driven Debanking

AFPI Examines Root of Debanking & Develops Actionable Next Steps for Congress and Admin. to Address Issue

WASHINGTON, D.C. – The America First Policy Institute (AFPI) this week published a new research report, “Debanked: When Political Bias Trumps Financial Judgement,” by Jill Homan, Deputy Director of Trade and Economic Policy at AFPI, and David Vasquez, Senior Policy Analyst for Energy & Environment at AFPI.

“Debanking 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. Broad regulations allow regulators’ decisions to potentially be made, not on quantitative financial terms, but instead on political motivations,” the report begins. “Further, decisions are often provided to banks in informal and purposefully vague terms. Banks aggressively internalize and operationalize the guidance they receive because, if a bank is perceived to be out of compliance, it risks steep penalties, including multi-billion-dollar fines and even criminal liability.”

AFPI outlines the impact of debanking, noting, “Debanking creates uncertainty and hardship. In a nation governed by laws, the practice of legal coercion through regulatory discretion is antithetical to the American system of justice. Ultimately, debanking is not just an economic problem, but a constitutional one. When federal officials use unofficial ‘guidance’ to achieve what Congress never authorized, they violate both the spirit and letter of the law. The solution is to excise power from the regulators, and that begins with narrowing their discretion.”

AFPI goes on to provide additional background on the history of the issue, then proposes several solutions for Congress and the administration to address government-debanking, including:

• Removing reputational risk: “The Senate Banking Committee recently passed the Financial Integrity and Regulation Management (FIRM) Act which now awaits a vote by the full Senate. The FIRM Act (and its House companion bill, which passed out of committee in May 2025 with bipartisan support) would remove the subjective criteria of ‘reputational risk’ which bank regulators use to evaluate a financial institution. Instead, financial regulators would rely entirely on objective criteria to assess financial soundness.”

• Taking the ‘M’ out of CAMELS: “Policymakers should restrict the subjective grading of financial institutions by regulators by removing the ‘M’ in the CAMELS evaluation standard, which the FDIC uses to rate banks’ overall financial health… The ‘M’ is the FDIC’s subjective assessment of the competency of bank management… Ending the ‘M’ in the rating system, like in the FIRM Act, would go a long way toward removing regulators’ subjectivity and potential biases, keeping the focus on financial criteria.”

• Establishing a federal Fair Access standard that puts banks – not bureaucrats – in charge of running their business: “Policymakers should establish a federal Fair Access standard to prohibit financial institutions from making business decisions for political reasons. This standard would ensure banks make decisions based on independent business judgements, and not because of pressure from federal regulators…Establishing a Federal Fair Access standard would also end the need for states to develop separate debanking legislation that further complicates banking operations with a patchwork of inconsistent and conflicting state laws.”

• Strengthen transparency between regulators and banks and between banks and customers: “Much of the debanking occurs through informal guidance, including verbal guidance; banks, being in the business of reducing risk and maximizing returns, are incentivized to treat even the most informal and non-binding guidance with the force of law. Ending or severely limiting informal guidance adds needed and objective constraints and certainty to bank regulation… Banks should be required to submit in writing notification to their customers of the reason for their debanking with any reasonable constraints due to security and confidentiality issues.”

• Modernize antiquated Anti-Money Laundering (AML) Laws and Know Your Customer (KYC) rules: “America’s Bank Secrecy Act and Anti-Money Laundering (AML) requirements worsen the problem of politicized debanking. Outdated rules established in the 1970s can make innocuous contemporary transactions appear criminal, often forcing banks to close accounts on the basis of legitimate transactions… [federal regulators have] the authority, today, to make simple changes that will help ensure AML rules are working as intended – to prevent financial crime – and not to fuel unnecessary debanking.”

As AFPI concludes and the Daily Wire reports, “AFPI’s big takeaway: ‘this administration and Congress have an opportunity to dramatically curb the practice of government-driven debanking across the country through federal action.’”

Read the full report HERE and the Daily Wire article on government-driven ‘debanking’ HERE.