More than 140,000 UK SMEs suffered ‘debanking’ last year

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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…