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America’s biggest banks are feeling relieved by the law after President Donald Trump’s executive order to crack down on bank fraud has had a months-long impact on the US financial system.
The reputational risk standard that forced regulators to force banks to confiscate individuals’ accounts for political reasons has been lifted and is allowing financial institutions more freedom to make more balanced and political internal policies, Wall Street sources told Fox Business.
Banks expect fewer account closures, Suspicious Activity Reports (SARs) require less paperwork and encourage financial institutions to focus on more risky activities.
The Trump administration’s decision has eased regulatory pressure on big banks, reducing politically motivated account closures and streamlining compliance requirements. (Michael Nagle/Bloomberg via Getty Images/Getty Images)
“We appreciate the positive steps taken by the Administrators, and have implemented other measures to improve transparency with our customers and address any negative perceptions about our practices,” a Bank of America spokesperson told Fox Business.
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Fox Business has learned that Bank of America has implemented new policies for contacting customers about the reason for account closures, if possible. The central bank also says it has never withdrawn accounts for political reasons, but pressure from regulators under the previous administration was there.
Although the BoA has previously lifted restrictions in certain sectors, the legal relaxation has allowed the country’s second largest bank to make it clear that political affiliation or opinion has never been weighed against those who qualify for an account.
Bank of America says the regulatory relief has allowed it to be more transparent about account closures while ensuring that political affiliation or opinion has never influenced its banking decisions. (Photos by Davis Turner/Getty Images)
Senate Banking Chairman Tim Scott described the role of regulators in the industry as “a financial swamp in DC and beyond that determines who gets an account, who gets a loan, who has access.”
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“These are people who were not elected by the citizens of our country,” explained Scott during an interview with Fox Business last year.
The Fincial Crimes Enforcement Network (FinCEN), which operates under the Treasury Department, issued an FAQ in October, which outlined important updates to the reporting requirements for SARs.
President Donald Trump signed an executive order to tighten bank withdrawal policies that forced regulators to pressure banks to close accounts unnecessarily last August. (Ken Cedeno/Reuters/Reuters)
Before the FAQ, SARs, or reports on why SARs were not filed at all, were required of banks. The consequences of banks not following strict and often biased regulatory requirements are huge, but sources on Wall Street say the Trump administration’s stance on regulators has eased some concerns, with legal pressure to consider political banking.
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The expanded powers controls obtained were created during Operation Choke Point under President Barack Obama’s Justice Department, which allowed regulators to target bank accounts based on a loosely defined “reputational risk.” President Trump’s executive order worked to reverse course on those standards and allowed banks to operate without intensive scrutiny from regulators.
First Lady Melania Trump said in her memoir that her bank account was frozen following the events of January 6, 2021. (Photos by Heather Diehl / Getty Images)
President Trump’s family has been exposed as a victim of reputational risk after First Lady Melania explained that the bank was closing her account and prevented their son, Barron, from opening an account following the events of January 6, 2021, as described in her memoir.
While the Trump administration has played a key role in reducing the power of regulators and giving the federal government what Wall Street says is greater authority over free markets and the financial system, the executive order could be reversed by future administrations.
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Senate Banking Chairman Tim Scott has been talking about his legislation, the Financial Integrity and Regulation Management (FIRM) Act, to ensure that the regulatory powers are checked and to prevent political bank withdrawal procedures are coordinated and cannot be reversed without Congress.
Senate Banking Chairman, Tim Scott, has pushed for the passage of the FIRM Act, which would incorporate policies set forth in President Trump’s administration. (Al Drago/Bloomberg via Getty Images/Getty Images)
“I pushed back against regulators in Washington who tried to pressure banks to cut off legitimate business with the American people every day,” Senate Banking Chairman Tim Scott told Fox News Digital. “President Trump understands that no one should be left out of the financial system, that’s why he signed an executive order to stop this practice.”
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“We’re already seeing real results — regulators are rolling back rules that penalized banks for offering to legitimate customers, thanks to the President’s action and my FIRM Act,” Scott added.
The FIRM Act passed the Senate Banking Committee and awaits a vote on the Senate floor.
