London (Parliament Politic Magazine) – Following an independent investigation, it was revealed that NatWest failed to effectively communicate its decision to close Nigel Farage’s Coutts account, though the closure was deemed legal and primarily motivated by commercial considerations.
In the wake of these revelations, NatWest’s shares tumbled by 18%, marking its most significant drop since the 2016 Brexit referendum, as the bank’s latest financial results failed to meet investor expectations.
NatWest’s Share Decline Amid Profit Concerns
The institution, which is 39% government-owned, also downgraded its lending margin forecasts for the year, attributing this adjustment largely to customers shifting funds from current accounts to savings accounts. Additionally, NatWest reported £1.3 billion in profits for the three months ending in September, a figure that fell short of earlier predictions.
The release of the results coincided with the publication of the independent report conducted by the law firm Travers Smith, which had been commissioned to investigate the closure of Nigel Farage’s former UKIP leader account. Russ Mould, the investment director at AJ Bell, remarked that investors had shifted their focus from the report to what he described as an equally damaging profit downgrade.
He noted that this downgrade suggested that any anticipated benefits from higher interest rates appeared to be dissipating for the bank. Nigel Farage, a prominent advocate of Brexit, had previously disclosed earlier in the year that Coutts, the prestigious private bank catering to the wealthy and owned by NatWest, intended to close his account, citing a lack of explanation for the decision.
The Reasons Behind Nigel Farage’s Account Closure
His account closure was attributed to his failure to meet Coutts’ wealth threshold, based on information from an insider source. However, the politician later obtained a report from the bank, which revealed that his political views had also factored into the decision.
The aftermath of this revelation resulted in the resignation of NatWest’s CEO, Dame Alison Rose, who openly acknowledged an error in discussing Mr. Farage’s association with the bank. This situation also sparked a public debate regarding individuals having their bank accounts closed due to their ideological beliefs.
Travers Smith’s investigation ultimately concluded that the closure of Mr. Farage’s Coutts account was primarily a commercial decision, as it was incurring significant losses. Nevertheless, the bank also took into account other factors, including concerns about Coutts’ reputation with its clients, employees, and investors due to Mr. Farage’s public stances on issues such as the environment, race, gender, and migration.
Travers Smith’s Assessment of Political Views in Account Closure
Travers Smith stated that while Mr. Farage’s public views were not the primary determinant for the closure of his Coutts account, the law firm did acknowledge that these views supported the decision. Furthermore, the report highlighted that the decision made in May 2022 to continue categorizing Mr. Farage as a Politically Exposed Person (PEP) was deemed “incorrect.”
Designating someone as a PEP generally signifies a higher risk for financial institutions due to their potential involvement in bribery and corruption by virtue of their influential position. Consequently, banks are obligated to conduct additional due diligence on such individuals.
Mr. Farage criticized the review, branding it a “whitewash” and accusing Travers Smith of adopting a “mealy-mouthed approach to this intricate matter.” He also characterized some of the findings as “laughable.”
Sir Howard Davies, the Chairman of NatWest Group, acknowledged that while the investigation confirmed the legality of closing the account, it also identified significant deficiencies in the decision-making process, communication, and client confidentiality.
“We offer our sincere apologies to Mr. Farage for the treatment he received. His experience did not meet the standards that we should uphold for any customer,” he remarked.
Travers Smith stated that Dame Alison’s disclosures regarding Mr. Farage “likely constituted” a personal data breach, although she “honestly, but erroneously, believed that the client [Mr. Farage] had publicly disclosed his status as a Coutts customer.”
Criticism from Nigel Farage Regarding the Review
In an interview, Mr. Farage asserted that Dame Alison had the opportunity to rectify her mistake before the information was made public but chose not to do so.
The Financial Conduct Authority, which oversees banking regulations, noted potential breaches in its review and initiated investigations into both NatWest and Coutts.
Apart from Dame Alison, Peter Flavel, the head of Coutts, also resigned in connection with these events.
In response to the report released on Friday, Dame Alison stated, “The review has established that I inadvertently confirmed what had already been widely reported, namely, that Mr. Farage maintained an account at Coutts.”