UK

More than 140,000 businesses debanked by major lenders over past year, MPs say

A group of MPs on the Treasury Committee gathered the information as part of a probe into how many small to medium businesses face being debanked.

More than 140,000 business accounts were closed by major banks in the past year
Woman using laptop at home More than 140,000 business accounts were closed by major banks in the past year (Alamy Stock Photo)

More than 140,000 business accounts were closed by major banks in the past year, as they moved to clamp down on financial crime and get rid of unused accounts, new data has shown.

A group of MPs on the Treasury Committee gathered the information as part of a probe into how many small to medium businesses (SMEs) face being debanked.

It found that out of about 5.3 million accounts held by SMEs, 141,620 were forcibly closed by banks, based on figures given by large high street lenders.

This amounts to about 2.7% of the total amount.

The banks gave a variety of reasons for the closures, with Lloyds and NatWest among those who said concerns about financial crime and fraud were behind the vast majority of closures.

HSBC UK said that about two thirds of the more than 26,000 accounts it closed in the year to the end of October were related to customers’ “financial viability”, or the accounts being dormant.

The committee, which scrutinises the work of the Treasury, said it was concerned that banks were giving a range of reasons for readily closing down business accounts with little or no notice.

It highlighted that just three banks listed “risk appetite” as a reason behind forced closures, with about 4,200 cases listed.

This could indicate that decisions about debanking certain businesses, perceived to be too much of a risk to have as customers, are happening “informally”, the committee suggested.

Harriett Baldwin, the chair of the Treasury Committee, said: “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 a risk, are happening informally.”

“We can see from these figures that thousands of small businesses fall foul of their bank’s risk appetite definition, leaving them without access to a bank account,” she added.

“I hope publishing this data can aid scrutiny of the decisions taken by banks and help to ensure legitimate businesses are not being unfairly treated.”

The Treasury Committee is set to question the Economic Secretary to the Treasury, Bim Afolami, on Wednesday about whether he thinks small businesses in the UK are being treated fairly by lenders.

Barclays, HSBC, TSB, Lloyds, Santander, NatWest, Metro Bank and Handelsbanken provided information for the committee’s inquiry.