The Dutch government on Tuesday said it will reduce its stake in lender ABN Amro by a quarter to 30% through a trading plan.
Shares of the Dutch bank traded 1.2% lower at the market open and was last down 0.6% as of 9:15 a.m. London time.
The Dutch government, which currently holds a 40.5% interest in ABN Amro, announced via its investment vehicle firm NLFI that it will sell shares using a pre-arranged trading plan set to be executed by Barclays Bank Ireland.
ABN Amro was bailed out by the state during the 2008 financial crisis and later privatized in 2015. The government started reducing its shareholding in the firm last year.
The banking sector has been in the spotlight of late, after UniCredit‘s move to take a stake in German lender Commerzbank sparked questions on cross-border mergers in Europe and the lack of a complete banking union in the region.
Governments have been capitalizing on a rebound in shares to sell their shareholdings in banks that were taken over during the financial crisis. The U.K. and German administrations have both made moves this year to reduce their respective shareholdings in NatWest and Commerzbank.
Meta is facing calls from U.K. banks and payment firms like Revolut to financially compensate people who fall for scams on their services.
Jaap Arriens | Nurphoto via Getty Images
Tensions are escalating between banking and payment companies and social media firms in the U.K. over who should be liable for compensating people if they fall victim to fraud schemes online.
Starting from Oct. 7, banks will be required to start compensating victims of so-called authorized push payment (APP) fraud a maximum £85,000 if those individuals affected were tricked or psychologically manipulated into handing over the cash.
APP fraud is a form of a scam where criminals attempt to convince people to send them money by impersonating individuals or businesses selling a service.
The £85,000 reimbursement sum could prove costly for large banks and payment firms. However, it’s actually lower than the mandatory £415,000 reimbursement amount that the U.K.’s Payment Systems Regulator (PSR) had previously proposed.
The PSR backed down from its bid for the lofty maximum compensation payout following industry backlash, with industry group the Payments Association in particular saying it would be far too costly a sum tor the financial services sector to bear.
But now that the mandatory fraud compensation is being rolled out in the U.K., questions are being asked about whether financial firms are facing the brunt of the cost for helping fraud victims.
On Thursday, London-based digital bank Revolut accusedMeta of falling “woefully short of what’s required to tackle fraud globally.” The Facebook-owner announced a partnership earlier this week with U.K. lenders NatWest and Metro Bank, to share intelligence on fraud activity that takes place on its platforms.
Woody Malouf, Revolut’s head of financial crime, said that Meta and other social media platforms should help cover the cost of reimbursing victims of fraud and that, by sharing no responsibility in doing so, “they have no incentive to do anything about it.”
Revolut’s call for large tech platforms to financially compensate people who fall for scams on their websites and apps isn’t new.
Tensions have been running high between banks and tech companies for some time. Online fraud has risen dramatically over the last several years due to an acceleration in the usage of digital platforms to pay others and buy products online.
In June, the Financial Times reported that the Labour Party had drafted proposals to force technology firms to reimburse victims of fraud that originates on their platforms. It is not clear whether the government still plans to require tech firms to pay compensation out to victims of APP fraud.
A government spokesperson was not immediately available for comment when contacted by CNBC.
Matt Akroyd, a commercial litigation lawyer at Stewarts, told CNBC that, after their victory on lowering the maximum reimbursement limit for APP fraud down to £85,000, banks “will receive another boost if their efforts to push the government to place some regulatory liability on tech companies is also successful.”
However, he added: “The question of what regulatory regime could cover those companies who do not play an active role in the PSR’s payment systems, and how, is complicated meaning that this issue is not likely to be resolved any time soon.”
More broadly, banks and regulators have long been pushing social media companies for more collaboration with retail banks in the U.K. to help combat the fast-growing and constantly evolving fraud threat. A key ask has been for the tech firms to share more detailed intelligence on how criminals are abusing their platforms.
At a U.K. finance industry event focusing on economic fraud in March 2023, regulators and law enforcement stressed the need for social media companies to do more.
“We hear anecdotally today from all of the firms that we talk to, that a large proportion of this fraud originates from social media platforms,” Kate Fitzgerald, head of policy at the PSR, told attendees of the event.
She added that “absolute transparency” was needed on where the fraud was occurring so that regulators could know where to focus their efforts in the value chain.
Social media firms not doing enough to combat and remove attempts to defraud internet users was another complaint from regulatory authorities at the event.
“The bit that’s missing is the at-scale social media companies taking down suspect accounts that are involved in fraud,” Rob Jones, director general of the National Economic Crime Centre, a unit of the U.K. National Crime Agency, said at the event.
Jones added that it was tough to “break the inertia” at tech companies to “really get them to get after it.”
Meta has pushed back on suggestions that it should be held liable for paying out compensation to victims of APP fraud.
In written evidence to a parliamentary committee last year, the social media giant said that banks in the U.K. are “too focused on their efforts to transfer liability for fraud to other industries,” adding that this “creates a hostile environment which plays into the hands of fraudsters.”
The company said that it can use live intelligence from big banks through its Fraud Intelligence Reciprocal Exchange (FIRE) initiative to help stop fraud and evolve and improve its machine learning and AI detection systems. Meta called on the government to “encourage more cross-industry collaboration like this.”
In a statement to CNBC Thursday, the tech giant stressed that banks, including Revolut, should look to join forces with Meta on its FIRE framework to facilitate data exchanges between the firm and large lenders.
FIRE “is designed to enable banks to share information so we can work together to protect people using our respective services,” a spokesperson for Meta said last week. “Fraud is a multi-sector spanning issue that can only be addressed by working collaboratively.”
Revolut CEO, Nikolay Storonsky (L) and Meta CEO, Mark Zuckerberg.
Reuters
British financial technology firm Revolut on Thursday criticized Facebook parent company Meta over its approach to tackling fraud, saying the U.S. tech giant should directly compensate people who fall victim to scams via its social media platforms.
A day after Meta announced a partnership with U.K. banks NatWest and Metro Bank on a data-sharing framework designed to help prevent customers from falling prey to fraud schemes, Revolut said the pact “falls woefully short of what’s required to tackle fraud globally.”
In a statement, Woody Malouf, Revolut’s head of financial crime, said that Meta’s plans to tackle financial fraud on its platforms amount to “baby steps, when what the industry really needs is giant leaps forward.”
“These platforms share no responsibility in reimbursing victims, and so they have no incentive to do anything about it. A commitment to data sharing, albeit needed, simply isn’t good enough,” Malouf added.
CNBC has contacted Meta for comment.
New payment industry reforms will come into force in the U.K. on Oct. 7 that require banks and payment firms to issue victims of so-called authorized push payment (APP) fraud a maximum compensation of £85,000 ($111,000).
Britain’s Payments System Regulator had previously recommended a £415,000 maximum compensation amount for fraud victims, but backed down following backlash from banks and payment firms.
Revolut’s Malouf said that, while his company is on board with steps the U.K. government is taking to combat fraud, Meta and other social media platforms should do their part to financially compensate those who fall victim to fraud as a result of scams originating on their sites.
The fintech firm published a report Thursday alleging that 62% of user-reported fraud on its online banking platform originated from Meta, down from 64% last year.
Facebook was the most common source of all scams reported by Revolut users, accounting for 39% of fraud, while WhatsApp was the second-highest source of such events with an 18% share, the bank said in its “Consumer Security and Financial Crime Report.“
British neobank Monzo said Wednesday that it’s raised another $190 million, lifting the total it’s raised so far this year to $610 million.
The company told CNBC it raised the cash from new investors including Hedosophia, a backer of top European fintechs including N26 and Qonto. CapitalG, Alphabet’s independent growth fund, also participated in the round.
Singaporean sovereign wealth fund GIC also participated in Monzo’s latest fundraise, a source familiar with the matter told CNBC. The source spoke on the condition of anonymity as details of GIC’s involvement aren’t yet public.
GIC declined to comment.
The latest funding values Monzo at roughly $5.2 billion, an increase on the $5 billion valuation it attained in March when it raised $430 million. The total $610 million round marks the single-biggest funding round for a European fintech in the past year, according to Dealroom data.
TS Anil, CEO of Monzo, told CNBC his firm plans to use the cash to build new products and accelerate its international expansion plans.
“At the heart of it we are a mission-oriented company that’s looking to build the single place where people can meet all of their financial needs,” Anil told CNBC in an exclusive interview.
“What’s exciting to me is that, as we pursue that mission of changing people’s relationship with money, we’ve built a business model that is congruent with that as well, with this model that is built entirely around the customer.”
Monzo entered the black for the first time last year, hitting profitability following the end of its 2023 fiscal year. Anil said Monzo’s looking to ramp up profits with diversification into other income generators, like lending and savings.
Notably, Anil said that Monzo’s planning to launch its first pensions product in the next six to nine months.
That would put it in competition with traditional lenders including Barclays and NatWest. Last year, NatWest acquired 85% of U.K. workplace pension services provider Cushon for £144 million ($180 million).
Monzo’s funding expansion caps off a busy year for the nine-year-old firm, which now counts more than 9 million retail customers in the U.K. — 2 million of whom joined Monzo last year alone — and over 400,000 business customers.
Anil said Monzo identified that about a third of people using the service had never invested previously — and, more notably, 45% of the women investing via the Monzo app are first-time investors.
Another big priority for Monzo in the coming months is international expansion.
The company recently restarted its U.S. expansion efforts, hiring a long-time executive from Block’s Cash App as its new U.S. CEO after earlier abandoning a bid to acquire a banking license from U.S. regulators.
For now, Anil says, Monzo’s team in the U.S. is primarily focusing on product to ensure that the service it has there is of high enough quality that it can compete with major incumbents like JPMorgan and Citibank.
The U.S. has proven notoriously difficult for European neobanks to crack.
Revolut, meanwhile, has failed to formally file an application for a U.S. bank charter yet despite having earlier said it intends to file a draft application for a U.S. bank license.
“What I like about how we’re approaching this is, at the heart of it, it’s not just words,” Anil told CNBC in an exclusive interview Tuesday.
“The necessary conditions for the U.S. for us is getting the product right. That’s what we’re spending our time and effort on there.”
European expansion is also on the cards, Anil said, although he didn’t commit to a date for when this will happen.
Longer term, Monzo is also planning to launch a mortgages product, which would see it compete much more aggressively with U.K. retail banks in the world of lending.
Monzo currently offers monthly installment plans and consumer loans via its app.
It also has a “Mortgage Tracker” feature which lets users track how much they’ve paid toward their mortgage and how much equity they’ve built.
But it’s yet to officially roll out a service that would let people apply for mortgages directly within its app.
Anil said Monzo is in the early stages of exploring partnerships with lenders to offer this.
He declined to name any prospective partners.
One thing Monzo hasn’t got any immediate plans for is an initial public offering.
Although he thinks Monzo will make a “great public company one day,” Anil said it’s still too early to talk of an IPO. He says he’s focused on growing Monzo at scale before reaching that milestone.
The chair of one of Britain’s biggest banks faced a backlash Friday after saying it is not “that difficult” to get on the property ladder.
NatWest chair Howard Davies told the BBC’s “Today” program that the current economic landscape — which has seen interest rates rise to a 15-year high — is little different to other historical periods.
“I don’t think it’s that difficult at the moment,” Davies said when asked when it might be easier for Britons to purchase a property.
“You have to save, and that’s the way it always used to be,” he added.
U.K mortgage rates have largely held steady at over 5% since April 2023, with some lenders only this week lowering rates in anticipation of interest rate cuts from the Bank of England. Higher rates, in turn, have limited available stock on the market.
Meantime, higher inflation and a cost-of-living crisis has made it harder for would-be homebuyers to save the minimum 10% deposit typically required to purchase a home.
Davies acknowledged that consumers today would need to save more for their down payment due in part to new protections brought in in the wake of the financial crisis. However, he argued that the landscape was now safer for consumers, too.
“There were dangers in very, very easy access to mortgage credit,” he said.
“I totally recognize that there are people who are finding it very difficult to start the process. They will have to save more. But that is, I think, inherent in the change in the financial system as a result of the mistakes that were made in the last global financial crisis, and we have to accept we’re still living with that,” Davies said.
Still, the comments sparked a furore on social media, with critics describing Davies as out of touch.
Ben Twomey, chief executive of campaign group Generation Rent, said in a post that Davies had little idea what it was like for renters hoping to gain their first step on the property ladder.
“What planet does he live on? I wonder how often Sir Howard speaks to renters, as we pass on a third of our wages to landlords and struggle to pay our soaring bills,” Twomey said.
Richard Murphy, a political economist and professor at the U.K.’s University of Sheffield, described the comments as “a staggering demonstration of the disconnect between bankers and reality in this country.”
The average U.K. property currently costs £287,105 ($366,357), according to figures released Friday by Halifax, the U.K.’s biggest mortgage lender. Costs in major cities, however, are even higher, with the average London home now priced at £528,798.
Richard Donnell, executive director of Zoopla, told CNBC Friday that there was likely to be an increase in property purchases in 2024 as a result of easing interest rates. But he noted that the outlook remained “challenging” on the back of supressed sales volumes in 2023.
“We only had a million people move home last year,” Donnell said.
“Hopefully we just build back sales volumes [in 2024], because adjusting from 2% mortgage rates to 4, 5, 6% mortgage rates was never going to be a one-year, once and done thing,” he added.
The logo of NatWest, a retail unit of RBS, outside a bank branch in London, U.K., on Tuesday, June 26, 2012.
Simon Dawson | Bloomberg | Getty Images
Trading in NatWest shares was briefly suspended on Friday morning as the stock slid after a combination of lacklustre earnings and regulators flagging possible rule-breaking in a highly mediatized case.
Shares fell as much as 17% in morning trade, and were 10.7% lower at 11:14 a.m. London time — marking the steepest single-day fall for the bank since 2020, according to LSEG data.
The U.K.’s Financial Conduct Authority on Friday announced that its report into NatWest Group and its wealth management subsidiary Coutts found “potential regulatory breaches and a number of areas for improvement.”
These included the systems and controls around how they consider account closures and customer complaints, along with the effectiveness of governance mechanisms. The report was commissioned by NatWest, which is 39% state-owned.
A scandal erupted over the summer over the closure of the Coutts account of Brexit figurehead Nigel Farage, for which the politician said the lender did not initially provide a reason. Farage filed a subject access request to obtain a dossier that the bank held on him, which addressed his political views.
NatWest CEO Alison Rose then admitted to discussing Farage’s bank account with a BBC reporter, supplying information that was used in a story and later proved to be inaccurate. She eventually resigned in July, amid heavy criticism.
The FCA said it will now further investigate the banks’ processes.
Alison Rose, NatWest chief executive, (right) departs 10 Downing Street in London, after meeting with Chancellor Jeremy Hunt.
James Manning | PA Images | Getty Images
NatWest said in a statement that it had accepted and would implement all recommendations in the review. It added that it would also make its own changes to “ensure that the lawfully protected beliefs or opinions of customers do not play any role in exit, retention or onboarding decisions.”
NatWest Group Chairman Howard Davies said the report “sets out a number of serious failings in the treatment of Mr Farage.” Davies said the findings showed a “lawful basis for the exit decision” but “clear shortcomings in how it was reached as well as failures in how we communicated with him and in relation to client confidentiality.”
Separately, NatWest reported third-quarter results on Friday, posting pre-tax profit of £1.33 billion ($1.61 billion) coming in roughly in-line with analyst estimates, according to Reuters.
Its net interest margin was 2.94%, 19 basis points lower than in the second quarter, which it said was mainly because of customers switching balances from non-interest bearing current accounts to interest-bearing savings accounts.
The bank said that it expects a margin for the full-year of “greater than 3%,” following a prior forecast of “around 3.15%.”
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said this was a “dismal week” for NatWest, facing a “maelstrom of headwinds.”
“While NatWest is still grappling with governance issues, it’s also feeling the pressure from customers seeking much better returns on their deposits. The shrinking of its net interest margin as customers seek higher rates is a chill wind whistling through these results,” she said in emailed comments.
Longer-term cash balances jumped to 15% from 11% last quarter, Streeter said, “and this is a distinctly less profitable business than low interest current accounts.'”
The U.K.’s embattled Metro Bank has launched talks to sell a third of its mortgage book in an urgent attempt to shore up its balance sheet.
Matthew Horwood | Getty Images News | Getty Images
LONDON — The U.K.’s Metro Bank will likely struggle to raise fresh capital to shore up its balance sheet, according to analysts, who outlined bleak prospects for the beleaguered bank.
A number of ratings agencies and investment banks have downgraded the bank’s stock following a turbulent 24 hours in which its shares were briefly suspended from trading twice after plunging more than 29% from Wednesday’s close.
The turmoil came amid reports that the embattled bank was seeking to raise up to £250 million ($305 million) in equity funding and £350 million of debt. Metro Bank confirmed in a statement early Thursday that it was considering “how best to enhance its capital resources.”
Late Thursday, reports emerged that the bank was in talks to sell a third of its mortgage book. Rival banks including HSBC, Lloyds Banking Group and NatWest Group are now being sounded out to buy around a £3 billion chunk of its mortgage book, according to sources who spoke to Sky News and the FT.
Selling the assets would reduce the bank’s earnings but also sharply reduce the amount of capital it is forced to hold.
Metro Bank did not immediately respond to CNBC’s request for comment on the reports; nor did any of the rival banks cited.
However, analysts said the bank’s fund-raising prospects did not look good.
Investment bank Stifel on Friday downgraded the stock from “hold” to “sell,” saying it thinks there are “no easy solutions for the bank and risks to the bonds remain skewed to the downside.” It noted that the bank could be nationalized under the Bank of England’s resolution scheme and then sold on, either as a whole or in parts.
“We think at this point the bank is in a difficult position, with capital needs potentially of up to a billion over the next two years,” the analysts said, adding that the bank is just about breaking even or marginally profitable under “currently benign market condition.”
Barclays Bank also downgraded the stock to underweight on Friday.
Meanwhile, Fitch Ratings on Thursday placed the bank on “ratings watch negative” based on its assessment that “short-term risks to the UK challenger bank’s business model stabilization, capital buffers and funding have risen.”
The developments mark the latest phase in an ongoing saga for Metro Bank, which launched in 2010 with a pledge to challenge traditional banking in the wake of the financial crisis.
Last month, the Bank of England’s main regulator, the Prudential Regulation Authority, suggested that it was unlikely to allow the lender to use its own internal risk models for some mortgages.
The bank’s chair Robert Sharpe was called in on Thursday to meet officials from the central bank’s regulatory authority, as well as the Financial Conduct Authority (FCA), according to the FT, which cited people briefed on the situation.
The sources said it was the latest in a series of contacts between regulators and the bank over the past month as its share price almost halved.
When contacted by CNBC, the Bank of England declined to comment on the meeting.
Shares of Metro Bank have lost around two-thirds of their value since the middle of February. The bank was valued at £87 million as of the Wednesday close, according to Reuters.
Given its relatively low market cap, ratings agency DBRS Morningstar, which holds no rating on the bank, said in a note that Metro Bank’s ability to access external financing will be “highly constrained.”
However, it added that the bank’s difficulties were unlikely to have a broader impact on the U.K.’s financial sector due to its size and idiosyncratic issues.
In 2019, the bank reported a serious miscalculation of its risk-weighted assets, damaging its reputation and resulting in fines of £10 million and £5 million from the FCA and the PRA, respectively.
In the meantime, short sellers have been tapping into the bank’s misfortunes. Investors betting against the bank have gained £4.8 million so far in 2023, and £2.5 million in October alone, according to financial analytics firm Ortex.
“The short interest in Metro is very high,” it said in a note. “ORTEX currently estimates that 9.35% of the freely tradable shares are on loan and most likely shorted.”
Brian Armstrong, chief executive officer of Coinbase Global Inc., speaks during the Messari Mainnet summit in New York, on Thursday, Sept. 21, 2023.
Michael Nagle | Bloomberg | Getty Images
Coinbase CEO Brian Armstrong is unhappy with JPMorgan Chase’s decision to block crypto-related transactions at its U.K. digital banking subsidiary, Chase UK.
Chase UK earlier this week put out a notice to customers saying it will no longer allow its customers to purchase cryptocurrencies using its debit cards or through bank transfers, citing concerns over the risk of fraud to users from digital tokens.
The bank, which has operated as a standalone entity in the U.K. since 2021, said it was taking the step because “fraudsters are increasingly using crypto assets to steal large sums of money from people.”
“Once in a while we see a bank in the world that decides they want to de-platform this whole industry,” Armstrong said in an interview with CNBC’s “Squawk Box” on Thursday.
“I don’t think that’s OK. I don’t think that’s the rule of things in our society. I think the government should decide what is allowed and what’s not.”
The move from Chase UK has not happened in a vacuum. Other British lenders have taken similar steps to bar crypto transactions, citing the risk of fraud.
Examples include NatWest, which placed limits on the amount of cash that can be sent to crypto exchanges, and HSBC, which banned crypto purchases altogether.
In its note to customers Tuesday, Chase UK said that it was blocking the use of crypto by its customers due to concerns over a rise in fraud.
Data from Action Fraud, the U.K. fraud reporting agency, shows that U.K. consumer losses to crypto fraud increased by over 40% in the last year, surpassing £300 million for the first time.
Bitcoin, ether, XRP and other cryptocurrencies are not legal currency.
Originally created as an alternative, online form of money meant to bypass the need for bank accounts and other financial middlemen, they have increasingly been embraced by mainstream financial institutions such as PayPal, Visa, and Mastercard.
The people transacting in bitcoin and other digital currencies don’t disclose their real identity, making it harder for banks to trace them for suspicious payments versus digital fiat currency transactions.
Nevertheless, crypto’s proponents say that the industry has matured a great deal in the wake of the collapse of FTX and numerous other scandals. They say it can become part of everyday payments and trading in a way that is legitimate.
For its part, the U.K. has been working to develop legislation that would regulate retail trading in crypto assets.
The Financial Services and Markets Bill is one example of legislation that already includes some provisions on cryptocurrency. That specific law aims to bring crypto assets into the regulatory fold. But it is not a comprehensive law addressing crypto through tailored laws.
Jurisdictions around the world from Dubai to Singapore have been trying to position themselves as crypto-friendly places to encourage firms to set up shop there.
The U.S., meanwhile, has taken a hard line on cryptocurrency firms with its regulators stepping up enforcement action against companies.
Armstrong suggested that the U.K. government should take heed of Chase UK’s move to ban crypto payments — though he acknowledged the country’s ambition to become a “Web3 and crypto hub.”
“The government in the U.K. through [U.K. PM] Rishi Sunak and Andrew Griffith the city minister in London have it made clear they want to make the U.K. a Web3 and crypto hub,” Armstrong said.
“They are trying to attract businesses there. I was disappointed to see Chase UK’s stance on that. I hope that was a misunderstanding that will be clarified in the coming weeks.”
Internal documents obtained by Trump ally Farage revealed that Coutts — a high-end private bank and wealth manager requiring clients to hold a minimum of £1 million ($1.29 million) in investments or borrowing, or £3 million in savings — had opted to cut ties with him once his mortgage was paid off in July, as his account was “below commercial criteria.”
But the dossier also extensively cited Farage’s history of controversial views as part of the reason why he was deemed too commercially risky to remain a client, with the bank’s client analysis noting that he is “considered by many to be a disingenuous grifter,” and that “at worst, he is seen as xenophobic and racist.”
At the time that he was given notice of the bank’s “exit plan” for his account, Farage was offered an alternative account with high street bank and Coutts’ parent company NatWest Group — but he declined.
Although refusing to discuss details of other banks and their clients, HSBC boss Quinn told CNBC on Tuesday that “our policy is not to de-bank or exit a client based on their lawful personal views.”
“Our primary responsibility is to try to help customers get access to banking and to open up an opportunity for them, whether that’s the homeless in the U.K. where we’ve taken on a significant number of new bank accounts for the homeless in the U.K. and for those that have suffered from human rights abuses,” Quinn said.
“We also have a responsibility as an institution to look at any areas of financial crime compliance or we have an obligation to collect information on KYC (Know Your Customer), so we have those competing obligations but to reiterate, as a policy we do not exit clients based on their lawful personal views.”
The closure of Farage’s account triggered a heated debate in the U.K. and rocked the domestic banking industry.
NatWest CEO Alison Rose was forced to resign, after she admitted discussing details of Farage’s Coutts account with a BBC reporter in the wake of his allegations. Coutts CEO Peter Flavel also subsequently stepped down amid the fallout and public pressure, with Prime Minister Rishi Sunak and other government ministers falling in line behind the former Brexit Party and UKIP leader.
Jonathan Bachman | Getty Images
Farage revealed on Tuesday that new Coutts interim CEO Mo Syed had written to inform him that he can retain both his personal and business accounts, but he is still seeking compensation from the bank and has launched a campaign to tackle account closures across the industry.
Farage was originally offered an account at high street bank NatWest as an alternative, minimizing the risk of his losing access to banking services. But there are 1.1 million households across Britain without a bank account at all, according to the Resolution Foundation.
Research from the British think tank showed that, of those 1.1 million, 327,000 people fell into the poorest decile in terms of net equivalized household income, while the second and third deciles accounted for 181,000 and 157,000 households, respectively.
“Britain’s ‘unbanked’ are hugely disproportionately likely to be poor (close to half are in the poorest fifth of the income distribution). They’re also disproportionately likely to be young and living in a major city (where you’re four times more likely not to have a bank account than village dwellers),” Resolution Foundation CEO Torsten Bell wrote in a report published last week.
“This data doesn’t tell us exactly why these households don’t have bank accounts — but given the huge concentration among poorer households I think we all know it’s got more to do with poverty than political views.”
LONDON — NatWest Group CEO Alison Rose resigned after a media storm over the termination of Brexit figurehead Nigel Farage’s bank account by sister lender Coutts.
Rose admitted Tuesday to having discussed the details of Farage’s account with a BBC reporter and having thus been the source of a controversial story for which the national broadcaster has since issued an apology.
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Initially, the board reiterated its support for her to stay on as CEO, but at 2 a.m. Wednesday the bank announced her immediate departure by mutual consent.
In a statement, Rose said she remained “immensely proud of the progress the bank has made in supporting people, families and business across the U.K., and building the foundations for sustainable growth.”
The controversy
NatWest is 39% owned by the British taxpayer following the 2008 crisis, heightening the public interest in the bizarre saga.
“Despite a stellar performance as the first woman to take the helm of a U.K. bank, her mistake in discussing sensitive customer details with a journalist broke a sacred trust with the British public and her decision to step down was the only viable path,” said Danni Hewson, head of financial analysis at AJ Bell.
“She will be a loss, having worked her way up the ranks and championed diversity and inclusion in the sector with a huge focus on getting more women in financial services. But NatWest is no ordinary bank, it is still almost forty percent owned by the U.K. taxpayer, and the political and regulatory ramifications of this episode are likely to ripple out for months to come.”
Farage was informed last month that Coutts — a high-end private bank and wealth manager requiring clients to hold a minimum of £1 million ($1.29 million) in investments or borrowing, or £3 million in savings — planned to cut ties with him.
Alison Rose, NatWest chief executive, (right) departs 10 Downing Street in London, after meeting with Chancellor Jeremy Hunt.
James Manning | PA Images | Getty Images
He subsequently filed a subject access request (SAR) to obtain a dossier the bank held on him which he then published, claiming it showed the bank account was being terminated due to his political views.
Prime Minister Rishi Sunak and several members of his Conservative government issued statements condemning the bank and characterizing the termination of Farage’s account as an affront to free speech. Farage was offered an alternative account at regular main street bank NatWest, but declined.
His critics maintain that although frequent references are made to Farage’s political profile and controversial views, the reasons outlined for allowing the banking relationship to lapse were primarily commercial, and he was not “de-banked” as he claims.
The dossier
Minutes from the Wealth Reputational Risk Committee at Coutts on November 2022 state that Farage’s mortgage was due to expire in July 2023, at which point “on a commercial basis” it would not look to renew and therefore recommended winding down the banking relationship.
Without the mortgage, the bank indicated that Farage’s account value would fall below its commercial criteria. The committee recommended exiting the relationship in July, but was at the time seeking to retain Farage as a client barring any “flash points” that might pose further “reputational risk.”
Coutts said that upon expiry of Farage’s mortgage repayments, it “did not have the appetite to renew his mortgage or provide banking facilities” and had therefore implemented an “exit plan” that allowed for the bank to terminate Farage’s account earlier in the event of further controversy in the meantime.
“The Committee did not think continuing to bank NF [Nigel Farage] was compatible with Coutts given his publicly-stated views that were at odds with our position as an inclusive organisation,” the minutes added.
“This was not a political decision but one centred around inclusivity and Purpose.”
An update from March 10 this year noted that Farage’s account had “been below commercial criteria for some time and upon review of Nigel’s past public profile and connections, the perceived risks for the future weighed against the benefit of retention, the decision was taken to exit upon repayment of an existing mortgage.”
Farage’s politically exposed person (PEP) status — conferred by British banks to high-ranking public figures who may be susceptible to bribery — was downgraded to “lower risk” as he is “no longer associated with any political party” since stepping down as Brexit Party leader in 2021.
Part of the client analysis from Coutts contained within the 40 pages of personal data, highlighted an array of news articles alongside Farage’s own media appearances and tweets, determined that the “values” he promotes did not align with the bank’s.
“Particularly given the manner in which he states (and monetises) those views – deliberately using extreme, hatful[sp?] and emotive language (often with a dose of misinformation) – at best he is seen as xenophobic and pandering to racists, and at worst, he is seen as xenophobic and racist,” it said.
“He is considered by many to be a disingenuous grifter and is regularly (almost constantly) the subject of adverse media.”
LONDON – June 16, 2016: Then-UK Independence Party Leader (UKIP) Nigel Farage poses during the launch of a national poster campaign urging voters to vote to leave the EU ahead of the EU referendum.
DANIEL LEAL/AFP via Getty Images
Farage is a long-time ally of former U.S. President Donald Trump, vocal supporter of Russian President Vladimir Putin, and prominent figure in the British hard right, having previously led the U.K. Independence Party (UKIP) and the Brexit Party.
The documents note long lists of controversial statements and activities, including his filming of migrants arriving in dinghies via the English channel and reference to migrant boat arrivals as an “invasion,” and his blaming of violence in the city of Leicester last year on lawmakers who “promoted multiculturalism.”
Coutts acknowledged that Farage’s commentary “remains within the law regarding hate speech and arguably on the right side of ‘glorifying or promoting harmful behaviour’ (although we should be mindful of the role the ‘illegal immigrant / invasion’ rhetoric plays in contributing to discrimination and in some instances, violence, against migrants).”
The fallout
Farage told Sky News Wednesday that he was “shocked with the vitriol” contained within it, and is calling for the resignation of the entire NatWest Group executive board along with a regulatory overhaul of Britain’s banking sector.
British economist and financial author Frances Coppola, in a blog post Tuesday, agreed that the language in the bank’s risk assessment was “mostly negative and at times possibly defamatory,” and said now-ousted CEO Rose was right to apologize directly to Farage prior to her departure.
However, Coppola argued that the bank was “absolutely right to conduct such an assessment and fully entitled to reach the conclusions that it did,” with the Coutts risk assessment noting that there is an “extra cost attached to managing the accounts of high profile individuals such as NF.”
“Assessing the risk and cost of a customer is a commercial judgement. And reputational risk is hugely important to a bank like Coutts. It is wholly unreasonable to argue that they should not have taken account of – or even evaluated – the risk to them of doing business with a person as controversial as Nigel Farage,” Coppola argued.
“Why should a bank accept the extra cost that you create for them if you don’t borrow from them and don’t keep enough liquid savings with them to support their lending to other people? And why should it keep your account open when you don’t meet its published criteria, given the reputational risk and general aggravation you cause?”
LONDON – June 26, 2020: Private bank and wealth manager Coutts and Company, founded in 1692, and the eighth oldest bank in the world, displays support for Pride month at its offices in London.
Dave Rushen/SOPA Images/LightRocket via Getty Images
Britain’s Financial Conduct Authority said Wednesday that it had raised concerns with NatWest Group and Coutts about the “allegations relating to account closures and breach of customer confidentiality since these came to light,” and NatWest has launched an independent review of the series of events.
“It is vital that the review is well resourced and those conducting it have access to all the necessary information and people in order to investigate what happened swiftly and fully,” the FCA said in a statement.
“On the basis of the review and any steps taken by other authorities, such as the Financial Ombudsman Service or Information Commissioner, on relevant complaints, we will decide if any further action is necessary.”
Following a Wednesday meeting between Britain’s Economic Secretary to the TreasuryAndrew Griffith and U.K. banking chiefs, the U.K. Treasury reiterated in a statement “the government’s clear position on the importance of legal freedom of expression,” adding it is “wholly unacceptable” to terminate the account of a person for expressing their political views.
“Banks will also be required to spell out why they are terminating a bank account – boosting transparency for customers and aiding their efforts to overturn decisions,” the statement said. “There will be limited exceptions to these requirements, for example to ensure that bank communications aren’t interfering with investigations into criminal activity.”
Whatever the outcome of Farage’s demands for further resignations and regulatory scrutiny, British banking has been thrust into the spotlight and could become yet another political hot potato ahead of a general election due next year.
