With DEI Under the Microscope, Some Banks Are Revising and Rebranding Their Programs

The banking industry is grappling with how to respond to recent moves by the Trump administration to eliminate diversity, equity and inclusion programs.

Last year, companies began to sour on DEI initiatives, and that pullback has accelerated since President Donald Trump took office in January and issued a series of executive orders targeting diversity efforts.

“I think the pendulum is shifting the other way,” says Scott Yonker, a professor of finance in the business school at Cornell University. “Is it a permanent shift? I think at some point there will be some balance.”

Under Trump’s executive orders, federal agencies must eliminate any programs related to diversity initiatives, and federal contractors cannot offer DEI programs “that violate any applicable Federal anti-discrimination laws.” The attorney general also must create enforcement plans that include identifying the “most egregious and discriminatory DEI practitioners” within the private sector. Publicly traded companies could be particularly targeted.

Additionally, Attorney General Pam Bondi cited the recent U.S. Supreme Court case, Students for Fair Admissions versus Harvard, as the legal basis for the Justice Department to target DEI initiatives at private employers. In that decision, the Supreme Court ruled affirmation action programs for college admission decisions violated the equal protection clause in the Constitution.

“The administration is arguing that that decision doesn’t just apply to universities but also in employment decisions,” says Philip Berkowitz, who co-chairs the employment law and financial services groups at the law firm Littler Mendelson.

The pressure on banks goes beyond steps taken by the Trump administration. In January, a group of 10 state attorneys general, led by Texas Attorney General Ken Paxton, sent letters to six large banks and asset managers — JPMorgan Chase & Co., Bank of America Corp., Citigroup, Goldman Sachs, Morgan Stanley and BlackRock — warning those companies that they could face enforcement actions if their DEI programs and environmental, social and governance initiatives were found to violate federal or state law.

“These are very aggressive steps taken by the federal government, by the president, by various departments under his control and by state attorneys general,” Berkowitz says. “They have said they will go after what they consider to be illegal policies.”

To avoid potential issues, banks need to understand what would constitute illegal employment policies. So far, the law hasn’t actually changed, Berkowitz says. Title VII of the Civil Rights Act of 1964 has long prohibited companies from making hiring decisions based on certain characteristics, such as race or gender. Employers cannot implement quotas in terms of hiring based on gender, race and other characteristics and they cannot tie managers’ compensation to reaching certain diversity levels within their subordinates.

Employers can still actively recruit from historically Black colleges and universities, place job postings in publications or websites that target certain demographics, and hire from programs designed for women or racial minority groups.

“There are still ways to recruit and to satisfy your diversity and inclusion goals without violating the law,” Berkowitz says.

Still, banks should be wary. Large banks are more likely to be the target of any actions by the Trump administration or the Justice Department, experts say. However, even smaller institutions would be wise to review any diversity programs to ensure they are in compliance with the law.

“It’s sort of like the cliff problem for Wile E. Coyote,” says Dan Morenoff, executive director at the public-interest law firm American Civil Rights Project, referring to the cartoon character who frequently runs into mishaps while chasing the Road Runner. “If you take one step too far, you fall 3,000 feet. You should understand there is a lot of territory that is safe. You should take precautions to ensure you aren’t wrong.”

A few large banks have changed diversity policies in recent weeks. At Citigroup, management has eliminated “aspirational representation goals” and will no longer require a diverse group of candidates for job interviews. Wells Fargo & Co. has similarly eliminated a requirement to have a diverse slate of candidates for the first round of interviews for senior roles, Bloomberg News reported.

Wells Fargo did not respond to a request for comment.

Banks may also rebrand their DEI efforts. For instance, diversity efforts could become “access and opportunity,” Berkowitz says, though he emphasized that changing a program’s name would not be a sufficient defense if the program did, in fact, violate the law.

Citigroup changed the name of its “diversity, equity and inclusion and talent management” team to “talent management and engagement.”

When asked for comment regarding its recent changes, Citigroup pointed to a February note that CEO Jane Foster sent to employees. In that note, Fraser outlined these changes and emphasized four principles that guide the bank’s decision-making regarding diversity. Those principles included creating “a workforce consisting of the best talent from the broadest pools” to better serve its communities and ensuring its “talent and engagement initiatives enable colleagues of all backgrounds to feel valued and to thrive.”

Finally, publicly traded banks should review references to DEI in any public disclosures, Berkowitz says. Banks should ask themselves if “those statements should be revised,” he adds. Some banks have already taken this step by reducing or eliminating mentions of DEI in recent disclosures.

Chris Cucci, chief strategy officer at Climate First Bank, the $889 million subsidiary of Climate First Bancorp in St. Petersburg, Florida, believes corporations that didn’t have a true commitment to DEI will likely abandon their programs. However, businesses where diversity is embedded in the culture will continue to embrace those principles.

“My advice would be to separate yourself from the public definition of these concepts and think about the original meaning and spirit of DEI,” Cucci says. “Then see if that definition aligns with what you do as a business.”