An inquiry by Britain’s Treasury Committee has uncovered that eight leading banks have closed nearly 142,000 accounts belonging to small businesses within a year, citing risk appetite and financial crime concerns. This move has sparked a debate on the accessibility of banking services for small enterprises, raising questions about the fairness and implications of such actions.
Unveiling the Scale of Account Closures
The investigation revealed that Barclays, HSBC, TSB, Lloyds, Santander, NatWest, Metro, and Handelsbanken collectively shut down accounts, affecting 2.7% of the 5.3 million business accounts held by small companies. The closures were primarily attributed to the banks’ risk management strategies and efforts to combat financial crime. However, the term ‘de-banking,’ referring to the practice of closing or refusing customer accounts, was discussed as potentially being addressed informally, raising concerns about transparency and accountability in the banking sector.
Impact on Small Businesses
Harriett Baldwin, Chair of the Treasury Committee, expressed significant concern over the closures, emphasizing the critical role of banking services in supporting legal business activities within the UK. The abruptness with which accounts were closed, often with little to no notice, has left many small businesses without essential financial support. This situation has highlighted the need for a more balanced approach to risk management, one that does not disproportionately affect small enterprises.
Legislative Protection and Fair Treatment
In response to the findings, questions are being raised about whether existing legislation adequately protects small business customers from unfair banking practices. Britain’s Economic Secretary to the Treasury, Bim Afolami, is expected to address these concerns during a Treasury Committee meeting. The focus will be on ensuring that banks treat small business customers fairly and that adequate safeguards are in place to protect these businesses from arbitrary account closures.
The closure of nearly 142,000 small business accounts by major UK banks has underscored the challenges faced by small enterprises in accessing banking services. As the Treasury Committee seeks answers and potentially new legislative protections, the banking sector is being called upon to reassess its approach to risk and customer service. The outcome of this inquiry may well set the stage for significant changes in how banks interact with small businesses, aiming for a fairer and more supportive banking environment.
