Source · Select Committees · Treasury Committee
Recommendation 11
11
Accepted
Paragraph: 77
SME bank account closures for 'risk appetite' reasons lack transparency and consistency
Conclusion
Any SME with a legal business should be able to access a bank account. Banks may need to close business accounts because of regulatory requirements and concerns around financial crime, but thousands of accounts are being closed for vaguely defined reasons relating to “risk appetite” or “reputational risk”. What qualifies for this type of account closure varies from bank to bank with little regulatory guidance. SMEs deserve to know why their account has been closed, and the lack of transparency, alongside inconsistency in how criteria are being applied, is unacceptable.
Government Response Summary
The government agrees that account closure requirements need improving and intends to bring forward legislation to ensure customers receive detailed explanations and longer notice periods when accounts are closed, except in financial crime situations.
Paragraph Reference:
77
Government Response
Accepted
HM Government
Accepted
Banking services fulfil a vital role in the lives of millions of people and businesses across the UK, and the Government is committed to ensuring high standards of protection and financial inclusion across the financial services sector. We agree with the Committee that current requirements relating to the closure of accounts could be improved, including to ensure greater transparency for customers. The Treasury intends to bring forward legislation to ensure that customers receive a detailed and specific explanation when providers close their accounts, along with a longer period of notice–unless certain exceptions apply, such as in financial crime situations. This is intended to ensure fair treatment and greater transparency for customers, recognising the essential importance of banking and related financial services. Clearer requirements and transparency, including signposting recourse to the FOS, may also assist with disputes in this area. The Government recognises the importance of bank accounts for businesses and individuals, and the legislation seeks to raise awareness of the ability to register a complaint with the FOS if a customer thinks they have been treated unfairly. We will continue to monitor for evidence of debanking of legitimate businesses and the work of relevant bodies, including the FCA.