The British government unveiled a draft law Thursday that would require banks to give customers a three-month notice period and a detailed explanation before closing their accounts.
This legislative move comes in the wake of former Brexit Party leader Nigel Farage's claim last year that one of the reasons Coutts, a subsidiary of NatWest catering to the rich, "de-banked" him was because of his far-right political views. The ensuing controversy sparked a heated debate that ultimately led to the surprise departure of NatWest's CEO, Alison Rose, and Coutts CEO, Peter Flavel, in July.
Rose stepped down from the U.K.-based bank after admitting to a "serious error of judgment" discussing with a BBC journalist NatWest's decision to close Farage's account. Rose, who had led the bank since 2019, claimed Coutts decided on the Brexit supporter-turned-pundit's account, and she wasn't a part of it.
Farage claimed in June that his account was closed with "no explanation or recourse," according to Bloomberg. The Brexit leader later got a hold of documents showing that Coutts staff discussed how his anti-immigration policy did not align with that of the bank.
Rose apologized for how Farage's account was handled and said the paperwork did not "reflect the view of the bank."
It is "absolutely not our policy to exit a customer on the basis of legally held political and personal views," she wrote to him.
Government officials also criticized the account closure.
"This would never have happened if NatWest had not taken it upon itself to withdraw a bank account due to someone's lawful political views," Andrew Griffith, the U.K.'s economic secretary to the treasury, tweeted in July. "That was and is always unacceptable. I hope the whole financial sector learns from this."
U.K. Prime Minister Rishi Sunak also vowed to look into the matter and toughen the rules on bank account closures, according to The Wall Street Journal.
In October, British Finance Minister Jeremy Hunt said he aimed to tighten banking rules to ensure customers are not discriminated against because of their political beliefs.
Around the same time, the U.K. government said the chancellor laid out stricter rules to "stamp out debanking." The new rules would require banks to protect free speech and show how they are doing so. Banks should also ensure customers are not discriminated against for their political views.
"This action will give regulators the green light to take firm action if any bank is found to undermine or fails to protect the rights of their customers," the government statement said.
Under the proposed legislation, the notice period for payment service framework contract terminations will increase from two months to 90 days, and banks will be required to give their customers detailed and tailored explanations for closing the account. However, there are some exceptions to the requirements. Lenders, for example, would be able to close an account because of money laundering or terrorist financing without giving a notice period or an explanation.
The latest proposal states that banks cannot "insert clauses" into customer contracts to avoid the new requirements.
The government intends to put forth the new legislation before parliament in the summer, and it will "commence as soon as practicable" soon after.
The U.K. government said the rules could be revisited to calibrate them across different business models, and the Financial Conduct Authority might consider tailoring them more.
"The government has therefore concluded it is appropriate to address its reforms to contract termination rules to all payment services providers … For now, the government has introduced a targeted and limited exception for business models where the relationship with the end customer is intermediated," the regulation said.
