By Elizabeth Fenton, WBA communications coordinator 

“Debanking” is the latest lightning rod in the ongoing conversation about fairness and access in financial services. For many bankers across the state, the meaning and implications of debanking remain unclear. The Wisconsin Bankers Association (WBA) spoke with Peter Wilder, attorney at Godfrey & Kahn, who recently joined WBA President & CEO Rose Oswald Poels in a webinar addressing the Small Business Administration’s (SBA) recent debanking directive to lenders.

Debanking refers to modifying or terminating banking relationships for reasons that may appear politically motivated. Wilder notes that this definition leaves room for subjectivity, even with the federal order that prompted SBA’s guidance. “It comes down to changing your banking practices for customers depending on their either political or religious persuasions,” Wilder says. “It is not 100% clear what that means or what is the intent behind the executive order.”

The SBA issued the letter in late-August in response to Executive Order 14331, Guaranteeing Fair Banking for All Americans. The letter directs more than 5,000 lenders to identify and remediate potential instances of politicized or unlawful debanking by December 5, 2025, and to submit detailed reports by January 5, 2026.

The order, signed by President Trump earlier this year, requires federal banking regulators and the SBA to ensure that banks and credit unions are providing fair access to financial services, regardless of a person’s lawful industry or political beliefs. The mandate emerged in response to growing concerns that certain businesses — such as firearm manufacturers and advocacy organizations — were being denied accounts without clear explanations.

The executive order also directs the Department of the Treasury, Federal Deposit Insurance Corporation, and other financial regulators to issue their own reports on fair banking practices. Taken together, these directives represent one of the broadest federal efforts in recent years to examine how financial institutions extend or restrict access to lawful customers. The initiative’s reach may evolve as agencies interpret how far the concept of “fair banking” extends beyond the SBA’s loan programs.

For some, the order represents a renewed focus on fairness in financial access. For others, it raises concerns about how much discretion banks should retain to manage reputational and credit risk.

The buzz may suggest sweeping regulatory change, but community banks do not appear to be the focus. “The SBA released an updated reporting form that allows banks with less than $30 billion in assets to use a more streamlined process,” Wilder explains. “That tells us the administration’s focus is not likely on community banks.”

In other words, many believe community banks are unlikely to find themselves in the federal spotlight. Yet, they are still expected to demonstrate that their decision-making processes are rooted in fair risk management rather than political considerations. The conversation has prompted many banks to look inward. The process of reviewing policies, customer segments, and internal decision-making is about identifying wrongdoing as well as reinforcing public trust. For institutions that already operate with a culture of fairness, the SBA’s directive offers an opportunity to demonstrate that commitment with data and documentation.

For most WBA members, debanking is best approached as a compliance practice, one requiring risk assessment and proper documentation. In other words: Each institution should take a good-faith approach consistent with its business model.

“What we’re really talking about here is reinforcing good governance,” Wilder adds. “It’s about making sure your board and management team can point to a process that shows objective, risk-based reasoning. If you can do that, you’re in a strong position.”
Wilder cautions against viewing the SBA letter as an expansion of regulatory oversight, but rather an effort to ensure that a bank’s risk management practices don’t extend into political territory. “It’s not necessarily more oversight,” he contends. “It’s more mindfulness that there should not be ulterior reasons for denying banking services.”

That mindfulness, he says, may require institutions to reexamine long-standing internal practices. Policies on customer onboarding, credit review, and account termination should clearly identify risk-based factors — such as creditworthiness, compliance history, or transaction behavior — while avoiding ambiguous language that could be interpreted as subjective or arbitrary. “Even if your bank has never engaged in anything remotely political, you still want to be able to show that,” Wilder notes.

Even with limited exposure, banks are expected to take the SBA’s directive seriously. Wilder advises institutions to document their review process and ensure board-level awareness. “Boards should be confident that lending, deposit, and customer onboarding practices are applied consistently, and that decisions are based on objective, risk-based factors.”

Oswald Poels, in an Executive Letter sent to membership in October, emphasized that transparency, fairness, and documentation remain a bank’s best defense against misinterpretation. “WBA continues to engage federal agencies for clarification,” she added, “and we will share updates as soon as they become available.”

The SBA’s rapid rollout of the guidance highlights how seriously federal agencies are taking the issue — even if the practical impact will fall unevenly across the industry. Wilder stressed that while the directive may appear sweeping, its real message is about intentionality and ensuring that policies do not inadvertently exclude customers or industries.

Beyond compliance, the issue underscores a larger theme: how banks balance autonomy with accountability. Financial institutions have always had the discretion to manage risk — but that discretion is now under new scrutiny. The growing public interest in so-called “politicized banking” has blurred the line between risk management and perception, challenging banks to communicate more openly about how and why decisions are made.

In practice, Wilder suggests that institutions review past decisions through a broad lens to confirm they align with objective criteria. “Boards have got to take probably a broader rather than narrower view when they’re looking at this,” he says. “You just don’t want to find yourself in a position where something could be misinterpreted later.”

Wisconsin community banks can take comfort in knowing that their relationship-based business model already practices fairness and accountability — the exact principles the directive seeks to enforce. By staying transparent and documenting decisions, community bankers can navigate debanking with the same prudence that has long-defined Wisconsin banking.

As political attention on financial access grows, the topic of debanking is unlikely to fade anytime soon. Federal agencies continue to examine fair access across multiple sectors, from payment platforms and fintech partnerships. These developments hint at a more interconnected conversation about fairness, risk, and innovation — one that community bankers will inevitably be part of.

Ultimately, the SBA directive is less a call for alarm and more a reminder of the principles community bankers already uphold: fairness, diligence, and transparency. Wisconsin banks are encouraged to stay informed, engage their boards, and maintain strong documentation practices. As these expectations expand, community banks may play a defining role in illustrating how risk management and fair access can coexist.

Fenton is WBA Communications Coordinator.

Godfrey & Kahn is a WBA Gold Associate Member.