In 2023, UK banks made headlines as they closed over 140,000 small and medium enterprise (SME) accounts, a figure representing approximately 2.7% of the total 5.3 million SME accounts held across eight major banks, including Barclays, HSBC, TSB, Lloyds, Santander, NatWest, Metro, and Handelsbanken. This data emerged as part of a House of Commons Treasury select committee inquiry into SMEs’ access to finance, shedding light on the challenges faced by small businesses in maintaining banking relationships.
The reasons behind these closures varied among banks, with factors such as risk appetite, concerns about financial fraud, and limited information sharing contributing to the decision-making process. For instance, while Barclays categorized closures into six distinct reasons, including regulatory compliance and financial crime, TSB primarily cited financial crime and verification issues as grounds for account closures. HSBC highlighted financial crime as a significant factor, accounting for one-third of closures, emphasizing instances where the bank suspected illicit financial activity.
Notably, NatWest, Barclays, and Santander explicitly identified 'risk appetite' as a criterion for account closures, contributing to over 4,200 cases. These closures come amidst heightened scrutiny, with Economic Secretary to the Treasury, Bim Afolami, expected to address the Treasury Committee regarding SME financing access. The committee's inquiry, led by Treasury Committee chair Harriett Baldwin, aims to examine the fairness of treatment received by small businesses from banking institutions. Baldwin expressed concern over the readiness of lenders to close business bank accounts abruptly, stressing the potential impact on small businesses' access to essential banking services and urging for greater transparency in decision-making processes.
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Vice President/Mortgage Loan Officer at Queensborough National Bank and Trust NMLS 546319
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