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Regulator tells banks closure practices are “unacceptable”

Regulator tells banks closure practices are “unacceptable”

Monday 14 August 2023

Regulator tells banks closure practices are “unacceptable”

Monday 14 August 2023


The Guernsey Financial Services Commission says it has “made clear to banks” which are quickly withdrawing services from local customers without sufficient time to make alternative arrangements that those practices are “unacceptable”.

A Commission spokesperson told Express it’s aware of recent banking issues blighting some businesses including the closure of accounts for non-financial crime reasons with short notice periods that “make it next to impossible for the business in question to arrange alternative facilities with another bank”.

But the island’s financial regulator accepted that it “cannot entirely stop banks closing accounts for commercial reasons”.

It added that there have not been any recent changes to the Bailiwick’s anti-money laundering guidelines for businesses which “would explain the problems with banking services some local businesses report experiencing”.

Lenders have been encouraged to converse with the regulator if they have any concerns with local rules or guidance that is spurring them to discontinue certain services, as misinterpretation may be causing some to be overly cautious.

“We would encourage it to discuss that rule with us so we can consider whether it may be over-interpreting the text or whether it might be reworded without damaging anti-financial crime measures,” the spokesperson said.

It is also aware of some instances where group bank policy, often matching obligations set in the headquarter jurisdiction, being applied across other branches.

Guernsey_banknotes.jpg

Pictured: The banks which have withdrawn services say the closures are commercial decisions based on regulation.

“The Commission understands from the cases which have been brought to its attention that some issues emanate from group requirements, in meeting the legal and regulatory obligations which apply in the jurisdiction where the parent bank itself is located and imposed upon local operations,” the spokesperson said.

“Subsidiary and branch banking operations here generally apply policies and procedures set by group head office unless they impose a lower standard than required locally which we understand not to be the case.

While issues persist and have been formally recognised, the GFSC says it maintains a “strong desire” that businesses and not-for-profits can access services from local branches.

It also said it requires each bank to “treat all classes of customer fairly at all times”.

Wider banking issues came to the fore when Guernsey’s Chamber of Commerce reported a growing crisis particularly for smaller and non-finance firms trying to carry out basic banking activities.

President Diane de Garis said while some barriers have been removed for businesses in recent years the sudden withdrawal of accounts and slow pace of competitors to on-board new customers in time to continue business as usual operations meant the situation was “getting worse and worse”.

This was followed by a local bookkeeper, Tim Chilestone, penning a highly critical letter which argued the current situation for some companies is stifling economic growth and participation. 

The pair both appeared on an Express podcast to further explain the problems:

READ MORE...

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Chamber alarmed at banking access for non-finance businesses

OPINION: Current marketplace is "stifling economic growth" in Guernsey

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