The UK government has proposed a law requiring banks to give customers more notice and an explanation before closing their accounts, in response to increasing complaints about “debanking”. The proposed law comes in the wake of a highly publicised dispute last summer involving Natwest and former Brexit Party leader Nigel Farage over the closure of his account at the private bank Coutts.
Farage alleged that his Coutts account closure was politically motivated, sparking a scandal that led to the resignation of both Coutts and Natwest’s chief executives. While a subsequent review found no evidence of discriminatory practices, it did highlight shortcomings in Natwest’s communication regarding the matter.
Under the proposed legislation, banks and payment firms would be required to give their customers a 90-day notice period before shutting down their accounts, up from the current two-month timeframe. Additionally, they would also have to provide customers with a “sufficiently detailed and specific explanation”.
The legislation also includes provisions prohibiting banks from circumventing the rules through contract clauses. However, banks would retain the authority to close accounts without notice if it relates to anti-money laundering or counter-terrorism measures.
The UK finance ministry said in the draft law: “The government has been unequivocal in its view that customers should not see a payment service terminated on grounds relating to their lawful freedom of expression including, for example, political beliefs.”
The new rules are expected to be approved by parliament in the summer and will come into force “as soon as practicable thereafter”, the finance ministry said.
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The Sierra Club, a major US environmental organisation, has filed a lawsuit against the Securities and Exchange Commission over its newly issued rules mandating public companies to report climate-related risks. The lawsuit contends that the SEC’s regulations fail to adequately safeguard investors as they omit requirements for disclosing Scope 3 emissions, which originate from indirect sources such as supply chains.
Initially proposed in 2022 to standardise climate-related disclosures for US companies, the rules were watered down to exclude Scope 3 emissions disclosure following pressure and legal threats from industry groups. While Republican-led states and energy industry bodies have already filed lawsuits aiming to block the rules, the Sierra Club’s lawsuit represents the first legal challenge asserting that the regulations are insufficient.
The Sierra Club argues that without comprehensive information about climate risks, investors cannot effectively manage their portfolios. Sierra Club executive director Ben Jealous stated: “While the SEC’s final climate disclosure rule will provide investors with some much-needed information, the commission’s arbitrary decision to remove robust emissions disclosure requirements and other key elements from the proposed rule falls short of what the law requires.”
The lawsuit seeks to compel the SEC to reconsider its decision to dilute the rules. In response, an SEC spokesperson stated that the agency would “vigorously defend” the climate disclosure rules in court.
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JPMorgan has incurred a fine of $348.2mn from two US bank regulators due to its inadequate programme for monitoring its trading activities, the Federal Reserve disclosed yesterday.
The Federal Reserve, along with the Office of the Comptroller of the Currency, imposed the penalty, citing misconduct spanning from 2014 to 2023. The OCC separately stated that JPMorgan failed to effectively monitor billions of trades across at least 30 global trading venues.
A spokesperson from JPMorgan said the bank self-identified the issue internally and is actively working to rectify it. Additionally, the spokesperson said that there was no evidence of employee misconduct or any harm to clients or the broader market.
JPMorgan disclosed in February that it expected to pay roughly $350mn in civil penalties for reporting incomplete trading data to surveillance platforms. This is the bank’s second significant fine in recent years regarding its data management. In 2021, JPMorgan paid $200mn to settle civil charges from two other regulators for record-keeping lapses.
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Klarna bank is poised to utilise “open banking” to enable its UK customers to make payments directly from their bank accounts as part of an effort to reduce its reliance on payments services such as Visa and Mastercard. The move will help Klarna reduce costs, as bank transfers are cheaper than accepting payments through Visa and Mastercard’s services.
The initiative, as reported by Bloomberg, citing an anonymous source, is also aimed at establishing Klarna as a viable alternative to the dominant payment networks in the long term. Stockholm-based Klarna, best known for its “buy now, pay later” services, is also a licensed bank offering various financial products. It has 150mn customers and handles around $200bn in payments volume every year.
In an emailed statement to Bloomberg, Wilko Klaassen, Klarna’s head of open banking said, “open banking offers a huge opportunity for Klarna to reduce the cost of payments to society by cutting out the established card payment networks, and using up-to-date bank account data to make ever-better lending decisions”.
Klarna’s expansion into payments underscores the increasing competition faced by Visa and Mastercard. In the US, Capital One’s potential acquisition of Discover Financial Services could allow it to bypass Visa and Mastercard, giving the proposed credit card giant greater control over merchant fees.
