Banks Suspend Opening New Accounts for Small Businesses

It is being reported that HSBC, NatWest and Lloyds Banking Group have temporarily suspended opening new small business accounts as fears around the legitimacy of these new businesses grow. Recent industry data showed that up to 55% of applications were potentially fraudulent with suggestions that just 15% of those applying ended up opening a current account after identity and fraud checks.

But the move to suspend new account openings is not only being introduced by the major high street banks. Smaller banks including Virgin Money and Metro Bank have also put a block on new small business accounts.

Whilst banks must be acting correctly and doing everything possible to combat fraud, the temporary suspension comes at a time whereby history suggests there will be an increase in the number of new businesses being formed. With tens-of-thousands of people being made redundant, many will be considering striking out on their own, with data showing that past economic downturns and recessions see a peak in new incorporations and registrations.  Accordingly, there is concern that the move to suspend opening new accounts may stifle this and cut off a possible route for individuals to generate an income for themselves.

Tory MP Kevin Hollinrake, chairman of the All-Party Parliamentary Group on Fair Business Banking, commented: “You have people made redundant who want to open businesses, yet we’re closing the door to them. The banks doing this are excluding our most important sector that drives economic activity.”