The Financial Conduct Authority (FCA) recently released its preliminary findings on bank account access and closures, shedding light on an important aspect of the financial landscape. These findings have significant implications for both consumers and financial institutions. In this update, we’ll delve into the key takeaways from the report.
No account closures due to political views
One of the standout findings is that no financial firm closed an account primarily because of a customer’s political views between July 2022 and June 2023. The Payment Accounts Regulations strictly prohibit banks and building societies from discriminating against customers based on their political beliefs. While this is reassuring, the FCA plans to conduct further investigations to verify the data and gain deeper insights into why some accounts were closed due to reputational risk.
The data provided by banks, building societies, and payment companies revealed that the most common reasons for closing, suspending, or declining accounts were account inactivity or dormancy and concerns related to financial crime. These findings emphasise the importance of keeping your accounts active and maintaining transparent financial transactions to avoid potential issues.
A complex balancing act
The FCA’s report also raises important questions about the delicate balance between granting access to bank accounts and mitigating the risks associated with financial crime. The absence of an automatic right to a bank account in the UK, coupled with certain protections that do not extend to businesses, charities, political parties, and civil society organisations, underscores the complexity of this issue. FCA Chief Executive Nikhil Rathi points to the need for a broader debate on whether all individuals, businesses, and organisations should have the inherent right to a bank account, as is the case in some other countries.
The FCA’s further work
The FCA has outlined a comprehensive plan for further investigation and action. This includes efforts to verify the accuracy of reported data, closer scrutiny of accounts closed for political reasons and those due to reputational risk, and an exploration of the reasons behind the 1.1 million unbanked individuals in the UK. The FCA also plans to engage with consumer groups to better understand the impact of account declines, terminations, and suspensions within its regulatory purview. Moreover, a financial inclusion initiative is on the horizon, aimed at improving consumer access to financial services in early 2024.
The FCA has emphasised to firms their obligations under the Consumer Duty, reinforcing the importance of collecting accurate and sufficient information to assess whether they are delivering good outcomes for customers. Additionally, the FCA is working closely with the government on various fronts, including measures to combat fraud, strategic digital identity development, and consideration of the cost-sharing for consumer losses due to fraud, especially in light of the Online Safety Bill.
The FCA has also published an international perspective on account closures, highlighting how this issue compares with practices in other countries.
In conclusion, the FCA’s initial findings provide a glimpse into the complex landscape of bank account access and closures. While the absence of political discrimination in closures is a positive sign, there is still much work to be done to ensure fair access to financial services while combating financial crime. Neopay, as a leader in compliance and regulatory expertise, stands ready to assist financial institutions in navigating these challenges and ensuring they meet their obligations effectively. For more information on how Neopay can help, please contact us today.