British banks will be subject to stricter rules over closing customers’ accounts after a minister warned them that freedom of speech was the “cornerstone of our democracy”.
It comes after former Ukip leader Nigel Farage said his bank account was unfairly shut down by private bank Coutts, owned by NatWest Group, because it did not agree with his political views.
Banks will have to explain why they are shutting down someone’s account under the new rules. They previously have not had to provide a rationale for doing so.
The Government has also extended the notice period for a forced account closure from 30 days to 90 days, which it said gives customers more time to challenge the decision through the Financial Ombudsman Service or find a replacement bank.
The Treasury said the new rules were only possible because Britain had left the EU.
Andrew Griffith, the economic secretary to the Treasury, said: “Freedom of speech is a cornerstone of our democracy, and it must be respected by all institutions.
“Banks occupy a privileged place in society, and it is right that we fairly balance the rights of banks to act in their commercial interest, with the right for everyone to express themselves freely.
“These changes will boost the rights of customers – providing real transparency, time to appeal and making it a much fairer playing field.”
UK control after Brexit
The Treasury said the changes can only be made due to new powers in the Financial Services and Markets Act 2023, which gave the UK control of its financial rulebook following Brexit.
The proposed changes follow a call for evidence launched in January, following PayPal’s temporary suspension of several accounts last year. It found that changes were needed to ensure the right balance is being struck between protecting customers, and providers’ rights to manage commercial risk.
They require secondary legislation, which will be delivered through the powers granted in the Financial Services and Markets Act 2023, as part of the Government’s programme in building a smarter regulatory framework for UK financial services.
This runs alongside separate plans to clarify in legislation the requirements for politically exposed persons, and a review into whether these are being applied proportionately by financial institutions.
The Financial Conduct Authority will set out how they intend to conduct the review by the end of September.
