De-Banking – Recent Developments And Litigation And Regulatory Risk

Scrutiny of de-banking practices has continued to intensify and this article considers the litigation and regulatory risks faced by banks, guidance from the courts and some practical pointers when making a decision to freeze or close a customer account.

Recent high profile reports on the closure of customer bank accounts have included the following:

1. In February 2024, the Treasury Committee published a report with data showing that eight of the UK's biggest banks closed the accounts of 140,000 small businesses in 2023, or nearly 3% of those banks' total SME customer base. The banks gave various reasons for the closures including financial crime concerns and "where a business has been unable to satisfy verification requirements or has not responded to our attempts to contact them". Only three banks listed risk appetite as a reason for account closures.