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More than 140,000 businesses had their accounts closed by the UK’s biggest banks last year, according to data published by a parliamentary committee on Tuesday.
The lenders’ reasons for closing the accounts of small and medium-sized enterprises included concerns over financial crime and fraud, customers’ failure to provide requested information and the banks’ own risk appetite.
The closures are equivalent to about 2.7 per cent of the 5.3mn accounts held by SMEs with the eight banks that provided data to the House of Commons Treasury select committee as part of an inquiry into smaller businesses’ access to finance.
The banking sector has come under increased scrutiny over account closures since the controversy over the “debanking” of politician Nigel Farage in July, which led to the resignation of NatWest chief executive Dame Alison Rose.
The incident has led to broader questions about the reasons banks close accounts of individuals and smaller businesses. Lenders were asked in December by the Treasury committee to state how many SME accounts they hold, the number of closures in the past year and the reasons behind them.
The figures are based on the responses it received from the big four UK high street banks — Barclays, HSBC, Lloyds and NatWest — as well as Handelsbanken, Metro, Santander and TSB.
All of the banks listed financial or economic crime concerns as a reason for closing accounts but some did not separate this category from cases where customers had failed to pass all due diligence checks, for example, making it difficult to compare the data from different lenders.
NatWest said 97.1 per cent of its SME account closures were because of “concerns about financial crime or fraud, or due to NatWest . . . being unable to meet its regulatory obligations by continuing the [customer] relationship”.
HSBC said almost two-thirds of closures related to either customers’ financial viability or dormant accounts, with only 34 per cent connected to concerns about financial crime, such as money laundering.
Only three of the eight banks — NatWest, Barclays and Santander — gave data for account closures related to their “risk appetite” at 1.4 per cent, 4.8 per cent and 10.2 per cent, respectively. Santander’s figure, however, included those accounts it closed for “non-compliance to policy”.
Harriett Baldwin, Conservative chair of the committee, said: “The fact that only three lenders included ‘risk appetite’ in their criteria indicates these discussions may not be systematically recorded, leaving questions over whether decisions on the debanking of certain businesses, based on what banks perceive as a risk, are happening informally.”
The committee believed “any company engaged in a legal business activity in the UK should be able to find a bank to offer them a bank account”, she added.
Martin McTague, national chair of the Federation of Small Businesses, said the scale of the account closures revealed by the committee was “very troubling”.
He called for the Financial Conduct Authority watchdog to publish figures quarterly “with properly defined reasons for each closure so that meaningful comparisons can be made and tracked over time”.
SMEs have raised wider concerns in recent months about their treatment by banks. In December, the FSB filed a complaint to the FCA claiming that banks were unfairly demanding that directors of its members give personal guarantees for business loans.
Letter in response to this article:
Debanking is just a lazy way to manage risk / From Steve Round, Chair, Governing Board, Forum of the Global Alliance for Banking on Values Co-Founder, SaaScada, London EC3, UK
