(Bloomberg) -- The UK’s financial watchdog told banks and other lenders they must do more to ensure that parliamentarians, senior public servants and their families aren’t treated unfairly, following concerns that some customers were being denied accounts on the basis of their political views.
Most banks didn’t subject so-called politically exposed persons to excessive or disproportionate checks, the Financial Conduct Authority said in a statement Thursday. Still, “all firms could improve,” the FCA said, setting out fresh guidelines to ensure UK customers aren’t denied services based on political opinion.
The new guidance comes after the Treasury called last August for the FCA to “urgently” investigate the scale of debanking following a political outcry when Nigel Farage, leader of the Reform UK party, lost his account with NatWest Group Plc’s upmarket subsidiary Coutts. The fallout prompted the resignation of the bosses of NatWest and Coutts, and increased scrutiny of the way banks implement additional checks on those involved in politics.
On Thursday, the FCA called on lenders to:
- Ensure that their definition of a politically exposed person, family member or close associate is tightened to the minimum the law requires and not beyond
- Review the status of politically exposed persons and their associates promptly once they leave office
- Communicate to such individuals effectively and in line with the Consumer Duty, explaining the reasons for their actions when possible
- Consider the actual level of risk posed by the customer and ensure information requests are proportionate to those risks
- Improve the training offered to staff dealing with politically exposed individuals
“Public service naturally comes with greater scrutiny. But it must be proportionate and shouldn’t disadvantage people running for office or taking senior public roles, or their families,” Sarah Pritchard, the FCA’s executive director of markets and international, said in the statement. “Most firms try to get it right but there is more they can do.”
The regulator said that in a small number of cases, it’s “instigating an independent and more detailed review of firms’ practices.”
The FCA is also proposing to make changes to its guidance to reflect the new legal starting point that politically exposed people in the UK should be treated as having a lower level of risk than their foreign counterparts. It’s also planning to allow greater flexibility for who can sign off on customer relationships within firms, and make clear that non-executive board members of civil-service departments shouldn’t be treated as politically exposed.
The guidance is open for input until Oct. 18, the FCA said.
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