Today’s executive order defines debanking broadly as follows:

The term "politicized or unlawful debanking" refers to an act by a bank, savings association, credit union, or other financial services provider to directly or indirectly adversely restrict access to, or adversely modify the conditions of, accounts, loans, or other banking products or financial services to any customer or potential customer on the basis of the customer's or potential customer's political or religious beliefs, or on the basis of the customer's or potential customer's lawful business activities that the financial service provider disagrees with or disfavors for political reasons.

The EO goes on to ask financial institutions to “make reasonable efforts to identify and reinstate any previous clients of the institution or any subsidiaries denied service through a politicized or unlawful debanking action…”

The trouble with this is that, while reasonable on its face, it will prove difficult to determine whether a bank fired a client because of their political views or line of work, or because the bank viewed that client as excessively costly (potentially due to regulatory pressure). In theory, banks could use the loophole of saying “well we have no problem with this client per se, but the modeled lifetime value of the client is less than the compliance cost of us maintaining the account”. In general, clients in “high risk” industries are costlier to maintain, due to stepped up KYC/KYB requirements and costlier flow-through monitoring for certain types of FBO accounts (for instance, if a crypto exchange wants to settle fiat transfers to clients). These costs can (and have been) imposed by regulators for certain industries. Who is to say, under this definition, whether the client was fired because they were donating funds to crowdfunding in Gaza or because the bank felt that that would entail additional burdensome compliance costs for maintaining the account? Regulators aiming to redline certain industries could in theory continue to make debanking certain clients into a (rational) business decision, rather than a discretionary one. My proposed solution, as we will cover, is to focus more on regulatory transparency and fairness, rather than zeroing in on the banks themselves....Ultimately, a relatively light-touch legislative solution would be best and most enduring. Democrats will not support it if they view Congress as compelling the banks to serve clients indiscriminately, but they might consider signing on if a bill creates mechanisms asking regulators to be more impartial and transparent. (The solution to Alex Jones being debanked is not to demand that Chase platform him, but rather allow the newly-chartered Patriots Bank of Arkansas to choose to onboard him.) Democrats logically should seek to restrain the ability of regulators to use banks as political cudgels today, and Republicans should do it with an eye to the future. The Executive Order is a good start, but legislation must pass if we are to consign debanking to the dustbin of history.