Debunking ‘De-banking’

In recent months, the issue of de-banking has gained traction and has been widely publicised and popularised with little explanation as to the direct impact on our day-to-day life. De-banking is the process by which a bank withdraws banking services from an existing customer often due to concerns related to regulatory compliance or reputational risk. While financial institutions have valid reason to mitigate risks, the practice of de-banking raises important questions about access to financial services, the impact on businesses and individuals involved in legal proceedings and what comes next.

The rationale behind de-banking can seem complex but financial institutions often use it as a tool to protect their interests and reputation. The primary motives often include minimising exposure to legal and regulatory risks, preventing potential or foreseeable fraud claims and protecting and safeguarding their reputation.

De-banking has a significant consequence for clients and has been said to assume guilt and undermine the presumption of ‘innocent until proven guilty’ by people in the financial sector.

The case that has started this conversation in the media recently was the case of Nigel Farage being de-banked from Coutts, an exclusive and private bank owned by NatWest (despite being offered a regular account at the sister bank, NatWest). It was reported via the BBC that Mr Farage fell below the wealth limit required for this bank. This was later proven to be false and his subject access request from the bank stated that he, as a customer, he was not consistent with Coutt’s “position as an inclusive organisation” given his “publicly stated views”. Farage has said that the request called his views and opinions “xenophobic, chauvinistic and racist”. While this case has faced significant backlash and opposition, it has started a trend of people speaking out about having been de-banked and how this has affected them with some claiming discrimination against age, race, gender, and sex. Legislation says that a bank “must not discriminate against consumers legally residing in the United Kingdom by reason of sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion” and, therefore, banking institutions should not be withdrawing from financial agreements based on any of the forementioned topics.

While Fiona Bruce Solicitors offer financial dispute resolution services, if you find yourself in this position, the best and most appropriate solution is often just to switch banks. It may also be worthwhile to contact the bank and ask for a subject access request to investigate the reasoning for your de-banking.

The contents of this post do not constitute legal advice and are provided for general information purposes only.