Key UK banks including Barclays, Santander, and Lloyds have seen a rise in account closures, attributing it to efforts in combatting fraud and inactivity. Amidst these closures, the banking sector also faces the challenge of addressing the surge in fraud, particularly through social media, while navigating the dynamics of interest rates.
In a recent Treasury Committee meeting, key UK banks have disclosed an uptick in the number of account closures over the past year, surpassing figures from 2022. Prominent institutions such as Barclays, Santander, Lloyds, and NatWest have cited various reasons for these closures, including account inactivity or dormancy and efforts to combat fraud and financial crimes. Specifically, Santander reported the closure of 37,000 accounts, largely as part of an information update initiative, while NatWest indicated that a majority of its account closures were linked to fraud prevention measures rather than issues with customer reputations.
A controversy surrounding the power banks hold to close accounts emerged following accusations by former politician Nigel Farage against Coutts, a NatWest group division. Farage claimed his account was closed due to political disagreements, sparking a broader discourse on the reasons behind account terminations.
Bank executives have also raised concerns over the increasing menace of fraud, particularly emphasizing the role of social media platforms in facilitating over 80% of fraudulent activities. They urged for enhanced collaboration between banks, technology companies, and telecommunications firms to develop more efficient anti-fraud tools. Charlie Nunn, Lloyds’ Chief Executive, stressed the preference for preventing fraud compared to compensating affected individuals after the fact.
Regarding savings rates, the executives defended their strategies by noting a shift in consumer behavior towards higher-yield savings accounts, amidst discussions on why banks have not offered higher interest rates to savers. Despite acknowledging the current volatility in the mortgage market, they forecast a gradual normalization of mortgage rates in the future.
The discussion underscored the critical challenges faced by the banking sector, including the fight against fraud, the management of account closures, and the dynamics of interest rates, highlighting the need for concerted efforts across multiple sectors to address these concerns effectively.
