Thousands of small and medium-sized estate and letting agencies were debanked in 2023, with financial institutions forcibly closing accounts across the sector. Evidence provided to the House of Commons Treasury Committee revealed the scale of the problem for businesses across the UK.
Harriett Baldwin MP, Chair of the Treasury Committee, wrote to the UK CEOs of major banks, asking for:
- The number of SME business accounts held by their organisations, and if possible, a break-down by business sector.
- The number of accounts closed at the instigation of their organisation for the year to date, and the proportion of those that were SME business accounts.
- If possible, a breakdown by business sector of the accounts closed.
- The reasoning for the closure of the accounts.
Regulatory and economic crime concerns behind closures
For the banks that provided a breakdown of the number of SME bank accounts closed, real estate businesses bore the brunt, with Lloyds closing 1,130 accounts, Santander closing 320, Metro Bank closing over 10%, and Handelsbanken closing 22%.
While closures varied across institutions and sectors, banks cited regulatory compliance, concerns over financial crime, and failure to furnish requested information as their primary reasons for closing accounts.
Real consequences for agents
In the UK, letting agencies are required to hold rent money in a client account, where the money is protected. Without a valid client account operated by a FCA-regulated bank or business society, a letting agency cannot legally operate or take out a client money protection policy, which is a legal requirement in England, Scotland and Wales.
Neil Cobbold, managing director of client accounting and automated rental payment specialists, PayProp UK, spoke out in support of the government’s investigation into large-scale account closures. “A stable banking relationship is fundamental for letting agencies and their tenants and landlords. The risk of not being able to receive or pay out rents due to account closures is a real worry for agents across the country, and one we are pleased to see the government investigating. It’s especially important to protect the SME business who are the ones most at risk of being debanked.
“Legitimate agents should not have to worry that their bank account will be closed. While some in the industry are calling for agents to be regulated (it may help prove to banks that they have effective financial controls and client money handling policies in place), putting a regulator in place will take time and will not solve the immediate problem some agencies are facing today.
“PayProp has been providing bank-integrated client money accounts for real estate agents around the world since 2004, and we have had the same banking partner in the UK since we started operating here in 2015. Over the years, PayProp has supported many letting agencies that have been debanked in securing compliant, reliable and efficient client accounting solutions through our platform.”
