More than 140,000 business accounts in the United Kingdom were closed by major banks in the last year, according to the U.K. Parliament’s Treasury Committee.
That figure amounts to 2.7% of all accounts held by small businesses, the committee said in a Tuesday (Feb. 27) press release.
These “de-banking” figures were released as part of the committee’s inquiry into whether small and medium-sized businesses (SMBs) have adequate access to financing, according to the release.
The eight banks that provided data for the committee’s report attributed the closure of these accounts to the banks’ risk appetite, financial crime concerns, lack of information sharing and other reasons, the release said.
The chair of the Treasury Committee, Harriett Baldwin, said in the release that it was “startling” to see how ready lenders are to close these accounts with little or no notice.
“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 de-banking of certain businesses, based on what banks perceive as risks, are happening informally,” Baldwin said in the release.
The Financial Times (FT) reported Tuesday that controversy over the “debanking” of politician Nigel Farage in July, which led to the resignation of NatWest CEO Alison Rose, has sparked broader questions about why banks close accounts of individuals and smaller businesses.
The Federation of Small Businesses expressed concern over the scale of the account closures and called for the Financial Conduct Authority (FCA) to publish figures quarterly with properly defined reasons for each closure, according to the FT report.
SMEs have raised wider concerns about their treatment by banks, with some saying that banks were unfairly demanding that directors give personal guarantees for business loans, per the report.
In July, the U.K.’s economic and finance ministry, HM Treasury, proposed rules for banks to combat “unfair bank account closures.”
Under the proposed rules, banks will have to give customers a 90-day notice period, allowing them more time to challenge the decision or move to another bank.
“These changes will boost the rights of customers — providing real transparency, time to appeal and making it a much fairer playing field,” Andrew Griffith, who was economic secretary to the Treasury at the time, said when announcing the proposed rules.
