Charity Commission Criticises Debanking of Not-For-Profit Organisations

A person rides a mobility scooter past branches of HSBC, NatWest, and Barclays banks on a pedestrianised shopping street in Bracknell town centre on Jan. 10, 2024. Adrian Dennis/AFP via Getty Images

A regulator has criticised banks for closing the accounts of charities, revealing that 42 percent of not-for-profits said they had experienced banking problems.

Helen Stephenson, the chief executive for the Charity Commission for England and Wales, told the Financial Times on Thursday, “I cannot tell you how many people we’ve heard of who’ve just had their bank accounts shut with no notice and no indication of what the issues are.”

A survey last year by the watchdog of 2,500 charities found that 42 percent had experienced banking problems, Ms. Stephenson said, including difficulty opening new accounts and accounts being frozen without warning. The Charity Commission chief said the survey suggested debanking occurred most frequently with Barclays.

“Can’t you [high street banks] do a bit to try and make your business work for these organisations, instead of trying to make these organisations work for your business,” she added.

Barclays told the FT, “We understand that it can be more difficult for charities ... to provide this information as a result of changes in trustees or more complex mandates,”  adding that it would “only ever close accounts as a last resort after multiple, repeated communications over the course of many months.”

Charities on the ‘Front Line’ of the Cost of Living Crisis

This is not the first time Ms. Stephenson has called on banks to do more to support the charity sector. In November 2023, she and her fellow charity regulator chiefs in Scotland and Northern Ireland signed a letter calling on banks to take “urgent action to help hard-pressed charities” by providing them better support.

The letter said not-for-profits were “on the frontline of the current cost-of-living crisis, providing vital support to people across the country at this challenging time,” and that “many charities are themselves facing financial difficulties.”

“The current stresses for charity trustees are heightened by avoidable frustrations at the availability of bank accounts and substandard service from banks,” the regulators said, outlining that from their collective work, they had found that charities had been debanked or had their accounts suspended for long periods of time.

Charities had also seen “poor customer service and administrative delays,” and found that online banking was not designed to match the way in which charities function.

The UK’s three watchdogs said that while they were working to provide information to help charities “better interact and understand what is required” by banks, they called on lenders to “do far more to step up training and customer service, or the community banking project will not address the challenges faced by charities.”

140,000 Small Business Accounts Closed Last Year

In February, the Treasury Committee revealed that banks had closed at least 140,000 accounts held by small businesses in the past year, representing 2.7 percent of small business accounts.

The data was provided to the committee by Barclays, Handelsbanken, HSBC, Lloyds, Metro, NatWest, Santander, and TSB.

The major banks listed reasons for account closures including account inactivity, account holders not providing updated information when requested, and abusive or threatening behaviour from customers. Closures also occurred over proof or suspicion of fraud or financial crime, or the financial institution’s business or risk appetite.

Barclays told the committee almost a quarter of their closures were because the accounts had gone dormant. Almost 60 percent were owing to a failure by the customer to comply with regulatory requirements to provide updated documentation or information, the bank said.

Committee Chairwoman Harriett Baldwin MP said at the time it’s “startling” to discover lenders’ readiness to close accounts “with little or no notice.”

Nigel Farage

The issue of debanking came to prominence in June 2023 after Coutts, a private bank that is part of the NatWest group, closed the account of former politician and GB News host Nigel Farage, who had been banking with the lender for 40 years.

An investigation into 48 account closures at Coutts published in December 2023 found “no evidence of discrimination,” including “no evidence of a customer’s account being escalated for exit, or ultimately being exited, due to their political views or party-political affiliations, or any other protected characteristic.”

Mr. Farage condemned the report as “a work of fiction,” continuing, “It bears no relation to the contents of the documents disclosed by the bank as to the true reason why they closed my account.”

In July 2023, the former politician had obtained via a subject access request a document from Coutts’s Wealth Reputational Risk Committee which said that “continuing to bank NF [Nigel Farage] was [not] compatible with Coutts” because his views were at odds with the bank’s “position as an inclusive organisation.”