Nigel Farage has started a national conversation about banks after revealing his own accounts were closed with little explanation.
The Brexiteer, former leader of both UKIP and the Brexit Party, and one-time MEP, alleged his account with private, prestigious bank Coutts was closed due to his controversial political beliefs.
Since then, it has exploded into a major news story, with the NatWest boss resigning and the BBC issuing an apology. The government has even announced new rules for banks.
Here’s why this issue has become a huge talking point.
What’s happened?
In late June, Farage released a video alleging that his bank account with Coutts, owned by NatWest, had been closed – and that other banks were refusing to open an account with him, too.
Then in early July, BBC News reported the account shut because it fell below the wealth limit (savings of £3 million or to borrow or invest at least £1 million), and that it was for “commercial reasons” according to one source.
However, this turned out to be inaccurate. Farage made a “subject access request” to see the paperwork behind the closure of his accounts, and then made those documents public.
In the paperwork, Coutts noted Farage’s mortgage was coming to an end, and that the relationship has been below commercial criteria for some time.
The documents also claimed he was seen as a “disingenuous grifter” with “racist, xenophobic and chauvinistic views” – suggesting his views were seen as a reputational risk by the bank.
Last week, Dame Alison Rose, who was chief executive of NatWest, which owns Coutts, issued an apology to Farage over these “deeply inappropriate” comments about him.
Then on Monday, Jack apologised to Farage saying his reporting about his bank account falling below the wealth threshold turned out to be “incomplete and inaccurate”.
On Tuesday, Farage got an apology from Dame Alison, as she admitted making a “serious error of judgement” after she discussed Farage’s personal account with the BBC’s business editor, Simon Jack.
Although NatWest said the board had “full confidence” in her, Dame Rose resigned hours later following reports that chancellor Jeremy Hunt and No.10 were concerned over her leadership.
NatWest’s biggest shareholder (at 39%) is still the taxpayer – a hangover from the global financial crisis in 2008 – so it needs the government on side.
NatWest has since seen a share price drop, and Farage has called for the whole board to resign.
Why do you need a bank account?
Not everyone in the world has a bank account.
According to money.co.uk, Morocco has the most unbanked people in the world, with 71% of its population not keeping their funds in a bank. In the UK, only 4% of adults are unbanked, while plenty of countries – like Australia, Canada and Norway – almost no unbanked adults at all.
Not having a bank account can impact how you’re paid your wages, pension and social benefits.
Everyday transactions get much harder without it, especially as many cash offices in the UK are closing down. And, in 2023, it’s not exactly common – or safe – for people to keep piles of cash around their homes.
Having a bank account makes it easier to withdrawal and deposit money.
It also allow you to get access to different government benefit schemes faster, as the government can deposit money straight into your online account.
Getting loans and insurance is easier, too, while having a credit card with your bank helps boost your credit score which can help you with future borrowing, like with a mortgage, as it shows you pay your debts back.
It’s a gateway to other financial products as well.
The best rate for utilities, phones and insurance are usually for people who sign up to a contract and pay by direct debit. The unbanked end up paying a premium of up to £485 a year for electricity, gas and loans just because they don’t have a bank account, according to a 2019 report from Pockit.
Everyone in the UK has a legal right to hold a basic bank account which can receive and make payments, under the payment accounts regulations.
The bank cannot discriminate against individuals based on political grounds, opinion or characteristics like race or gender – but they are free to deny additional services to customers for a few reasons, like the basis of suspicion of financial crime. They can close or refuse accounts if customers pose a reputational risk, too.
What happens if your accounts close suddenly?
This is called being de-banked, and can happen for a range of reasons, including not being able to earn enough to keep it open or the account is inactive.
Th bank will send your remaining money to you in a cheque usually, minus any outstanding fees, and it will return any deposits which are made into that account after closure.
It will have a big impact on your credit score – and that can be one of the reasons people get unbanked in the first place, making it a dangerous cycle.
As money.co.uk explained: “You cannot get a bank account with a poor credit history, you cannot improve your credit history without a bank account.”
Why is this now a national conversation?
Farage’s banking issues became a national talking point because many are outraged that a bank may have de-banked an individual for their politics – and breached client confidentiality.
This has happened before. Paypal closed accounts run by Toby Young, general secretary of the Free Speech Union, last year, but they were later reinstated.
That sparked a UK government review into payment services regulations.
There are also concerns banks may be over-enthusiastic with who it labels as a “PEP”. That’s a “politically exposed person” who may therefore be vulnerable to bribery or corruption, so banks have to do more due diligence.
Two MPs have also come out recently and said they have been refused accounts due to being PEPs.
One of the MPs have warned that the problem was “absolutely rife” in banking and they had “no joy” trying to open an account for office expenditure.
Meanwhile, industry chiefs reportedly acknowledged during a meeting with City minister Andrew Griffith the “importance of protecting lawful freedom of expression for customers accessing banking services”.
They acknowledged that these events have “impacted upon public truth for the whole sector”, and said they would “act quickly to restore confidence”.
What happens next?
The government has called for all banks to now explain why they are closing accounts and give a notice period of 90 days to allow people more time to appeal.
NatWest will also be carrying out an independent review into the incident which will be released to the public, according to the chair Sir Howard Davies.
City minister Griffith also said that it’s important “customers have trust in their banks, that they’re not going to have their service withdrawn because of their political views”.
He told bank and building society chiefs: “It’s not the job of the bank to tell us what to think or what political party we should support.”
He said the whole sector should implement the government’s new regulations, so customers can challenge account closures more easily.
But, the Treasury has confirmed that banks and building societies can offer “shorter termination periods” for account closures in exceptional circumstances. For instance, where “providers are obliged to comply with financial crime law”.
There will be also limited exceptions for a bank to not spell out why an account has been closed.