Major UK banks have closed over 140,000 accounts held by small businesses in the last year, according to the Treasury Committee. 

The figure represents approximately 2.7% of the 5.3 million small and medium enterprise (SME) accounts with the eight banks that provided data.  

Barclays, HSBC, TSB, Lloyds, Santander, NatWest, Metro and Handelsbanken provided the data. 

This information was gathered as part of a House of Commons Treasury select committee inquiry into SMEs’ access to finance. 

The banks stated that risk appetite, worries about financial fraud, and a lack of information sharing were among the factors leading to the closures. 

However, the categorisation of these reasons varied significantly between the banks.  

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Barclays, for instance, has divided its account closures into six distinct categories that include regulatory, dormant accounts, debt-related, financial crime and others.  

On the other hand, TSB cited only financial crime and verification issues as reasons for their account closures, specifically mentioning cases “where a business has been unable to satisfy verification requirements or has not responded to our attempts to contact them”. 

According to HSBC, financial crime accounted for one-third (34%) of account closures, including circumstances in which the bank has reasonable suspicions that an account was being used for illicit financial activity. 

Among the eight banks, only NatWest, Barclays, and Santander explicitly listed ‘risk appetite’ as a criterion for account closure, accounting for 4,214 of the cases.  

These closures come at a time when the Economic Secretary to the Treasury, Bim Afolami, is expected to face the Treasury Committee.  

With the committee’s inquiry into SME financing access concluding, Afolami is likely to be questioned on the fairness of the treatment received by small businesses from their banking institutions. 

Treasury Committee chair Harriett Baldwin 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. 

“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.”