Revealed: Banks are closing 1,000 accounts a day

Banks close more than a thousand accounts every working day, The Mail on Sunday can reveal.

The number of bank accounts being closed has exploded in recent years from less than 50,000 in 2016 to nearly 350,000 last year.

Details of the massive scale of account closures were obtained on the basis of a freedom of information request to the City Watchdog, the Financial Conduct Authority.

They come as crisis-hit NatWest continues to reel from the fallout from the Nigel Farage affair. Dame Alison Rose was forced to step down as CEO last week after NatWest’s private banking arm Coutts closed the former Ukip leader’s account over his political views.

It is estimated that nearly 90,000 individuals have been categorized by the banks as ‘politically exposed persons’. These include MPs and other figures who are believed to be at risk of abusing their position for personal gain and need additional scrutiny.

Separate figures from the Financial Ombudsman Service show that NatWest, which is 39 percent taxpayer owned, shared the highest number of complaints last year with Barclays over decisions to close bank accounts.

But NatWest chairman Sir Howard Davies, who is under pressure to resign, said the account closures were “not a huge consumer problem” and that the number of complaints was “steady”.

The FCA ‘debanking’ data obtained by The Mail on Sunday is based on annual reports from nearly 250 lenders who have closed their accounts solely because of concerns about financial crime such as money laundering and fraud.

The massive increase in account closures seems to confirm anecdotal evidence that lenders are increasingly adopting a ‘shoot first, ask questions later’ approach.

A growing number of companies, individuals and charities say this has resulted in their accounts being closed, despite no evidence of wrongdoing.

Sources say that some customers are being charged from their bank simply because they have perfectly legal cryptocurrency or gambling accounts.

Such closures are often shrouded in secrecy, with banks refusing to say why an account was closed, usually to avoid tipping off criminals. “In some cases, banks are prohibited by law from telling customers why an account has been closed,” said Tina McKenzie, policy chair of the Federation of Small Businesses.

“But where possible, they should be made aware so that if there has been a misinterpretation or misunderstanding, it can be quickly resolved.”

McKenzie called on regulators to publish annual figures on the number of closed accounts. Individual banks are currently not required to provide this information.

Banks generated over a million ‘reports of suspicious activity’ in 2019/20 and about half of those were referred to the National Crime Agency.

“It is clear that more innocent customers are having their accounts wrongfully closed,” says Jenny Ross, editor of Which? Money. Members of Parliament from the All Party Parliamentary Group on Fair Business Banking launched an inquiry last week into the extent of bank account closures.

“The FCA data suggests it is much more widespread than previously known,” said James Russell, managing partner of Humphries Kerstetter, City’s law firm that works with MPs.

Simon Fell, an MP and former co-chair of the APPG, said banks seemed to be dropping customers “just to reduce risk” rather than genuinely concerned. “This is a worrying trend that needs careful investigation,” he added.

The government has announced plans to change the rules surrounding bank account closures, including a requirement to give longer notice of an impending closure. The FCA said increased oversight by banks may explain some of the increase in account closures.