Let’s be honest, banks like Coutts should be able to choose their customers
Natwest’s handling of the Farage affair has been an unmitigated public relations disaster. They have turned a much-disliked public figure – a former UKIP leader – into a sympathetic victim of procedural mistreatment, false accusations, and severe privacy breaches.
The resulting furore has led to a public apology and top-level defenestration. Alison Rose was ousted as CEO on Tuesday evening after admitting to disclosing information about Farage to a BBC journalist. This included the incorrect claim that Farage’s Coutts account was only shut down for commercial reasons.
Ironically, this all began with Coutts’ ‘Wealth Reputational Risk Committee’. Their assessment concluded that not only was Farage becoming commercially unviable but also that offering him services was inconsistent with being an “inclusive organisation”. The document states, “…this was not a political decision but one centred around inclusivity and Purpose [sic.].”
This attitude shows how a certain ideology has seeped into major institutions. It’s not only that the Bank’s reputational risk committee failed to see the obvious reputational risk of debanking someone with such a large megaphone. But also, that they did not consider this a political decision. Of course, nothing could be more political than deciding someone’s views aren’t ‘inclusive’ enough to offer them a service.
In response to this saga, some conservatives, including within government, are considering new rules to prevent banks from discriminating on political grounds. Using state power to push back against the cultural turn to the left is tempting for the Tories. Moreover, Natwest are still 40 per cent taxpayer-owned, have a privileged licence to operate and an implicit bailout guarantee.
But is it wise to use state power to dictate that a private entity must do business with someone? Should a government that has talked about simplifying banking regulation to make the U.K. more attractive for investment place even more burdens on the sector?
The government risks undermining a vital principle of a free society: private banks like Coutts, like any other business, should be perfectly entitled to who they provide services to. Ultimately, the alternative is a form of enslavement in which individuals are forced to work for others without any choice.
That’s not to say we shouldn’t criticise the decision and its handling. Indeed, that’s the appropriate way to respond to these situations. But ultimately, Coutts has always been an exclusive private bank; most people would never be able to get an account let alone have theirs removed.
The government has a significant role in addressing the root causes for the increasingly precautionary approach taken by banks concerning risky individuals, which has resulted in thousands of people losing their accounts. There are the complex (Europen Union-imposed) compliance requirements for ‘politically exposed persons,’ cumbersome anti-money laundering rules and the emergence of the Financial Conduct Authority’s environmental, social and governance push.
These best-intentioned regulations encourage banks to take an excessively risk-averse approach, ultimately leading to the debanking of people like Farage. Suppose someone carries some potential risk that could entail the slightest possibility of an investigation or a multi-million pound fine from a regulator. In that case, it makes sense to shut down their account. Put simply, no regulatory compliance officer has lost their job for saying ‘no’.
Before the government adds even more requirements to banking licences, they should address their role in causing this mess in the first place.