FCA sets out initial findings on bank account access and closures

The Financial Conduct Authority (FCA) has published the initial findings from its survey among banks, building societies, and payment service providers in which the regulator explored the de-risking practices of such firms with respect to the denial of access to new payment accounts, account suspensions, or account closures based upon the political views of the (prospective) account holder. Specifically, the survey studied the reasons for account suspension or closures and looked at reasons for denying access to new payment accounts. It thereby collected information on (as quoted)
– the number of accounts terminated
– the number of accounts suspended
– the number and type of consumers declined accounts
– the reasons for these decisions and
– the complaints received on this issue
The survey was conducted among 34 firms earlier this year and considered bank account data covering the period between July 2022 and June 2023. It followed concerns about unjustified account closures and due the fact that UK law – unlike laws and regulations in other jurisdictions – does not guarantee the right to a payment account.
#### Findings
According to the enclosed report, the findings do NOT suggest account closings based upon the political views of persons. In fact, the most cited reasons for suspensions or closures were account inactivity (reaching dormant status in accordance with UK law) or financial crime issues concerning the account holder. The same holds true for account openings.
As the figures suggest, there was overall little account suspension or termination activity on part of institutions as far as personal bank, business, or basic bank accounts are concerned: Only up to 2.3% of personal accounts, up to 1.8% of business accounts, and up to 1.8% of basic bank accounts (BBAs) were suspended. Institution-initiated account terminations concerned up to 3.4% of personal accounts, up to 6.9% of business accounts, and up to 1.8% of BBAs in the referenced time period.
The figures were somewhat higher with respect to declining access to NEW accounts, with up to 6.7%, 11.4%, and 35.7% of account applications being denied for personal, business, and basic bank accounts, respectively.
As far as the FCA can tell from the provided figures, it cannot (yet) verify that previous account closures or the denial of new accounts were caused by a (potential) account holder’s political view.
#### Way forward
As this matter is of significance, not only to customers, but regulators and businesses as well, the FCA will follow-up on this issue. Specifically, the Authority plans to, among others
– re-evaluate the provided data to ensure its accuracy. It will thereby particularly look at data relating to outlier firms;
– look at firms‘ justifications of account closures in more detail, particularly at their handling of accounts closed for political or reputational reasons;
– review declined applications and terminated basic bank accounts;
– further investigate the reasons for 1.1 million individuals in the UK to not have any account at all;
– engaging with consumer groups on this matter.
Furthermore, the FCA strongly reminds financial institutions that
– it is prohibited to discriminate on the basis of an account holder’s or applicant’s political view pursuant to the Payment Accounts Regulations of 2015 and
– they are obliged to provide good outcomes to customers in accordance with the new Consumer Duty. In that regard, institutions should reflect on their practices and evaluate, whether or not they are truly providing such outcomes to their customers and whether or not any account denials, suspensions, or terminations are justified.
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Concurrently, the FCA has published two other documents, namely
(1) an open letter directed at the Chancellor of the HM Treasury in which the FCA provides an update on the matter of unjustified closures of payment accounts and informs of its way forward in this matter.
(2) a research paper which explored international regulatory approaches to de-risking and current practices of firms in other nations as far as the denial of access to new accounts, account suspensions, or account closures are concerned.