City regulator responds to Hunt’s de-banking letter and will report back by September

The City regulator will outline the scale of the so-called ‘de-banking’ scandal next month, in response to a letter from the Chancellor last night.

Writing to Jeremy Hunt, the Financial Conduct Authority acknowledged his “request of areas to cover” in an investigation into the row, and that it was “in line with our plans”.

The FCA said it had been preparing a data exercise to look at the scale of the de-banking scandal, asking the biggest lenders to provide them with details about accounts being closed.

This comes after chancellor Jeremy Hunt asked the City watchdog to look into the extent of de-banking, as he said the practice poses a “threat” to free speech.

Among the strands of the investigation are details about the number of account terminations and the reasons for them, as well as the number of complaints about terminations and the outcomes of the complaints procedure.

Lastly, the FCA will request data on the number of accounts opened, those refused and any other data about lenders’ policies and procedures about accounts.

In its letter, it outlined banks do have the right to close accounts to prevent criminality, such as money laundering or funding terrorist activities. But, it is “less clear the extent to which banks may be terminating accounts for other reasons, which may be unjustified and which, in some instances, may contravene the law.

“As the regulator, it is important that we understand the scale of the issue and the drivers behind a reported increase in account terminations.

Banks face widespread reforms over account closures, after the Nigel Farage row that last week led to the resignation of the top bosses at Natwest and Coutts.

The former Ukip leader said his bank account was unfairly shut down by Coutts, owned by Natwest Group, because it did not agree with his political views.

Farage’s campaign against account closures has received support from ministers, with Hunt expressing concern over how many people are affected.

The Chancellor asked the Financial Conduct Authority to look into the issue and report back to him next month.