The Financial Conduct Authority (FCA) has called on UK banks and account providers to enhance support for individuals seeking bank accounts, particularly those in vulnerable circumstances.

In a comprehensive new report released on Wednesday, the regulator highlighted areas where financial institutions could improve their practices to ensure more inclusive access to banking services.

Sheldon Mills, executive director of consumers and competition at the FCA, stated: "We've seen examples of really good practice – with account providers helping people access a product vital for financial inclusion – but also areas where there is room for improvement. By sharing both, we want to achieve more consistent outcomes, with people being aware of what accounts there are that might be right for them, more support for the vulnerable and people not being denied access without good reason."

The FCA emphasised the need for increased awareness of basic bank accounts, which allow customers to make and receive payments without an overdraft facility. The regulator found that several providers could streamline their application processes for these accounts. Banks were also encouraged to build on existing good practices, such as collaborating with homeless charities to tailor support for customers in vulnerable circumstances.

Furthermore, the watchdog urged account providers to review their approach to account denials and closures, ensuring vulnerable consumers are not disproportionately affected. Banks were reminded to act in line with their obligations under the Consumer Duty, including clear and helpful communication with customers. The report stresses that providers should not deny access solely due to a lack of standard forms of identification and should clearly communicate which alternative forms of ID are acceptable.

The report also addressed concerns about account access for specific groups, including sex workers and adult entertainment industry professionals. The FCA revealed that a lack of access to business banking could lead to "significant harm" for individuals in these sectors.

The regulator has now called on lenders to establish a "clear and properly considered definition" of reputational risk to govern decisions around account closures. This marks the first time the FCA has provided such detailed guidance regarding the banking industry's handling of the adult entertainment sector.

In response to the report, a spokesperson for UK Finance, a trade association for the banking sector, said: "We recognise some sectors experience greater challenges in accessing banking services. We are continuing to work with regulators, our members and relevant trade bodies to facilitate improved access to banking. If an account is closed, or an application refused, this only happens after extensive review and investigation."

The issue of account closures gained prominence in 2023 when Reform UK leader Nigel Farage accused Natwest-owned Coutts of attempting to "debank" him partly due to his political views. The scandal led to the resignations of both Natwest and Coutts' chief executive officers.

While the FCA's 2023 report found no evidence of accounts being closed due to lawfully expressed political opinions, the regulator has now asked senior leaders in firms to sign an attestation taking personal responsibility for ensuring compliance with rules. This move aims to reinforce accountability within financial institutions.

The FCA's latest findings and recommendations aim to achieve more consistent outcomes across the banking sector, with improved support for vulnerable customers and clearer justifications for account denials or closures. The regulator's report also highlighted issues faced by other organisations in accessing accounts, including pawnbrokers and charities, although it noted its limited remit to act for business and charity customers.

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