Debanking: More than 140,000 business accounts forcibly closed down in 2023

28 February 2024 , 14:42

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Banks such as Lloyds and NatWest cited fears over financial crime and fraud as the reasons for most closures (Image: No credit)

Over 140,000 business accounts were shut down by major banks last year, according to new data.

MPs on the Treasury Committee collected this information as part of an inquiry into how many small-to-medium businesses face being cut off from banking services. They found that out of approximately 5. 3 million accounts held by these companies, 141,620 were forcibly closed down by banks.

These figures were provided by large high street banks and account for about 2. 7% of the total volume. Banks such as Lloyds and NatWest cited fears over financial crime and fraud as most closures' reasons. HSBC UK stated that about two-thirds of the more than 26,000 accounts it shut in the year leading up to October's end were due to concerns over customers' "financial viability" or because the accounts were dormant.

The committee, which overlooks the Treasurys activities, expressed concern that banks are offering a range of explanations for quickly closing business accounts without any notice. It pointed out that only three banks mentioned their "risk appetite" as a reason for forced closures, with around 4,200 instances listed.

This could suggest that decisions to cut off certain businesses viewed as excessively risky are being made "informally", noted the committee. 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."

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"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 quiz Economic Secretary to the Treasury, Bim Afolami, on Wednesday on whether he thinks UK small businesses are being treated fairly by lenders. Barclays, HSBC, TSB, Lloyds, Santander, NatWest, Metro Bank and Handelsbanken gave information for the committee's inquiry.

Lawrence Matheson