The global divide on ‘de-banking': How the US, UK and EU approach risk

Yahoo

11 hours ago

Imagine logging into your bank account one morning and finding everything frozen—cards declined, standing orders stopped and your savings untouchable. No fraud alert, no bounced cheque. Just a brief message: 'We are closing your account. Please make alternative arrangements.'
This is not a rare nightmare. Around the world, more people and businesses are being 'de-banked'—cut off from basic banking services.
In the financial industry, the practice is called 'de-risking' or when banks sever ties with clients or even whole sectors to avoid regulatory or reputational risk.
While it might sound like a niche compliance issue, in reality, it sits at the intersection of financial crime prevention, political rights, trade flows and everyday access to money—and the UK, US and EU are taking sharply different approaches to it.
The US: Concerns over "woke capitalism"?
Earlier this month, US President Donald Trump signed an executive order aimed at preventing banks from denying services based on political or religious beliefs. The order bans the use of 'reputational risk' as a justification for closing accounts and directs banking regulators to review practices within 180 days.
Supporters say the move protects freedom of political expression and stops discrimination against conservatives, who claim they have been disproportionately targeted.
Critics warn it could force banks to keep serving clients engaged in activities that create genuine financial crime or security risks.
As with many issues Trump is passionate about, the topic of de-banking in the US was spurred by his personal experiences. He repeatedly accused JPMorgan Chase and Bank of America of refusing his business after his first term as president because of his and his supporters' conservative views.
He claims JPMorgan gave him 20 days to close his account and that Bank of America refused a large deposit even though both banks have denied politically motivated action.
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Another high-profile case was that of the National Council for Religious Freedom (NCRF), an organization founded in 2022 that explicitly backs politicians who support combining politics with religion and vote against bills such as the Equality Act, which prohibits discrimination on the basis of sex, gender identity and sexual orientation, "because it prohibits religious freedoms."
Groups like these, especially if they rise to national prominence quickly and start depositing large sums into their accounts without providing sufficient background or donor transparency, can trigger automatic responses from banks worried about compliance with anti-money laundering regulation and are subject to enhanced monitoring.
So when NCRF's accounts at JPMorgan Chase were suspended, it was probably not based on their clients political beliefs. Banks are profit-maximising institutions who aim to serve a wide yet reliable client base—drawing political attention to their work is the stuff of literal nightmares for them, especially banking behemoths like JPMorgan Chase.
In a letter, the bank said the closure was due to incomplete compliance documentation—not religious or political reasons.
Yet the NCRF used this decision to decry "woke capitalism" and launch a national campaign in the US to limit decisions, including reputational risk, and focus solely on quantifiable risks like credit, operational or compliance issues.
The new executive order is cause for headaches for bankers. In practice, lenders may have to review thousands of past account closures, document decisions more extensively and possibly reinstate customers they previously cut off.
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The UK: Farage, Coutts and public outrage
In Britain, the debate was turbo-charged by the 2023 Nigel Farage–Coutts affair. When the high-end bank closed the Brexit campaigner's account, internal documents later revealed the decision factored in his political views. The row became front-page news, prompting government promises to strengthen transparency.
From a compliance and commercial standpoint, there are reasons why Coutts' decision may have been well within the norms of risk management. Farage's status as a politician makes him a Politically Exposed Person or PEP under anti–money laundering rules.
UK banks are required to apply enhanced due diligence to PEPs, including detailed checks on sources of wealth, closer transaction monitoring and ongoing reassessment of any potential links to corruption or financial crime. That doesn't imply wrongdoing—but it does mean the account demands more resources and carries a higher regulatory burden. For a bank whose value proposition is built on discreet, low-risk relationships, this can tip the cost-benefit balance.
Reports at the time suggested that Farage's account had fallen below Coutts' minimum financial thresholds for certain services. When a client no longer meets profitability benchmarks, but still demands high levels of compliance oversight and carries reputational sensitivities, a private bank has strong incentives to part ways.
In that light, Coutts' choice looks less like a political purge and more like a calculated alignment of its client book with its risk appetite and commercial strategy.
However, that was not the angle that dominated the headlines, and it ended up shaping de-risking and de-banking policy in a significant way in the UK.
In 2024, complaints to the Financial Ombudsman Service about account closures rose 44% to nearly 3,900, with a higher proportion upheld in favour of consumers. Meanwhile, over 140,000 business accounts were closed in 2023—raising concerns, especially for small businesses and non‑profits.
Since then, UK banks must give customers at least 90 days notice before closure and provide more detail on why accounts are terminated. The conversation is still dominated by high-profile, politically sensitive cases—rather than the wider economic and trade implications of de-risking.
The EU: Quiet, technical and high stakes
By contrast, Brussels has treated de-risking as a long-standing, largely technical policy challenge. For years, EU institutions have issued guidance to safeguard financial inclusion while enforcing anti–money laundering and counter–terrorism financing (AML/CFT) rules.
"European Banking Federation (EBF) member banks often find themselves caught between a rock and a hard place: they must comply with stringent AML/CFT requirements—they are required to end relationships with their riskiest clients—yet they are requested to ensure access to basic banking services for legitimate customers," the European Banking Federation told Euronews in a statement.
"Hence their de-risking decisions should remain proportionate and risk-based, not indiscriminate bans on entire countries or customer groups," they continued.
According to the EBF, most banks in Europe focus on individual, case-by-case de-risking and pay particular attention to 'red flags'. For example, situations where a customer's identity cannot be verified using secure, government-approved ID checks, or any transaction in which they cannot confidently confirm who the person or company really are or who the "beneficial owner" is.
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For member banks, it is a matter of weighing whether the risks can be reduced enough to comply with regulations and protect the bank's reputation, and whether managing that risk would require more time, money, and effort than the account is ultimately worth.
"In the EU, de-risking is increasingly recognised as a significant consumer issue, though it is neither a new concern nor one that fully mirrors the priorities of the Trump Administration," the EBF statement continues.
"For years, EU institutions—most notably the European Banking Authority—have issued guidance aimed at safeguarding financial inclusion and ensuring that legitimate customers are not unfairly excluded from the banking system."