Ahead of the final session of the Treasury Committee’s inquiry
into whether SMEs have adequate
access to financing, the Committee has published data showing
2.7% of accounts held by small businesses have been closed by
their banks in the last year.
The data is based on figures from Barclays, HSBC, TSB, Lloyds,
Santander, NatWest, Metro and Handelsbanken. Paragon were unable
to provide the information.
Of approximately 5.3 million business accounts held by SMEs,
141,620 were closed by the banks. Reasons given for the
de-banking of businesses include risk appetite, financial crime
concerns, lack of information-sharing and other reasons.
The figures come as the Economic Secretary to the Treasury,
, is set to appear in front of
the Treasury Committee, where he is likely to be questioned on
whether he believes small businesses in the UK are receiving a
fair deal from their lenders. This will be the final session of
the committee’s inquiry into access to financing for SMEs.
The categorisation of reasons for account closures varies between
lenders. For example, Barclays broke their account closures down
into six categories whereas TSB split their figures between two
reasons – citing only financial crime 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 bank
closures, with 4,214 cases listed. It is noted, though, that this
does not rule out the possibility of risk appetite being
considered by those banks who didn’t explicitly list it in their
criterion.
Chair of the Treasury Committee, , said:
“One of the most startling pieces of evidence emerging from our
inquiry into Access to Finance for small and medium-sized
business is the readiness of lenders to close business bank
accounts with little or no notice.
“Our Committee believes that any company engaged in a legal
business activity in the UK should be able to find a bank to
offer them a bank account.
“The fact that only three lenders included ‘risk appetite’ in
their criteria indicates these discussions may not be
systematically recorded – leaving questions over whether
decisions on the de-banking of certain businesses, based on what
banks perceive as a risk, are happening informally.
“We can see from these figures that thousands of small businesses
fall foul of their bank’s risk appetite definition, leaving them
without access to a bank account. I hope publishing this data can
aid scrutiny of the decisions taken by banks and help to ensure
legitimate businesses are not being unfairly treated.”
