# UK banks back in political crosshairs after Farage fiasco
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-07-31
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: UK Banks Face Public and Political Ire After Farage Fiasco
Meta Description: UK banks face public and political scrutiny amid fallout from a dispute with former Brexit Party leader Nigel Farage, prompting CEO departures and renewed
URL: https://financedigest.com/uk-banks-back-in-political-crosshairs-after-farage-fiascohtml

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# UK banks back in political crosshairs after Farage fiasco

By Sinead Cruise, Iain Withers and Lawrence White

LONDON (Reuters) -After more than a decade trying to rehabilitate their image since an era of bailouts and mis-selling scandals, Britain’s banks are once again a target for public – and political – ire.

What started as a dispute between former Brexit Party leader Nigel Farage and NatWest-owned Coutts over the closure of his accounts has spiralled into a political and media storm that has cost NatWest its CEO and reopened old wounds about government intervention in the banking sector.

The fallout marks a watershed moment in relations between NatWest and the U.K. government, which remains its biggest shareholder following its taxpayer-funded rescue in 2008, with a [stake it says](https://www.financedigest.com/renault-to-offload-its-stake-in-lada-maker-for-one-rouble-russia-says.html "Renault to offload its stake in Lada maker for one rouble, Russia says") is managed at “arm’s length.

Yet the episode has also highlighted how easily UK [financial firms](https://www.financedigest.com/why-financial-services-firms-are-banking-on-behavioural-biometrics-to-beat-fraud.html "Why financial services firms are banking on behavioural biometrics to beat fraud") can be buffeted between political factions that have deepened since Brexit, ahead of the country’s return to the polls before January 2025.

The [culture wars are coming](https://www.financedigest.com/cell-tissue-culture-supplies-market-share-to-exhibit-steady-growth-in-the-coming-decade.html "Cell Tissue Culture Supplies Market Share to Exhibit Steady Growth in the Coming Decade") to UK businesses, including the financial sector,” said Andre Spicer, dean of City University’s Bayes Business School.

NatWest chairman Howard Davies said the political backlash ultimately led to the shock departure of CEO Alison Rose – the most senior woman in UK [banking](https://www.financedigest.com/at-europes-big-banks-women-make-some-gains-despite-rose-exit.html "At Europe’s big banks, women make some gains despite Rose exit") – after the pair agreed it would be too tough for Rose to continue. The finance ministry [says it was the decision of the bank’s](https://www.financedigest.com/bank-of-ireland-says-it-has-fixed-glitch-that-sparked-flurry-of-withdrawals.html "Bank of Ireland says it has fixed glitch that sparked flurry of withdrawals") board.

The affair also claimed the job of Peter Flavel, CEO of the 330-year-old private bank Coutts, which counted author Charles Dickens and [Queen Elizabeth](https://www.financedigest.com/queen-elizabeth-meets-sturgeon-after-new-push-for-independence-vote.html "Queen Elizabeth meets Sturgeon after new push for independence vote") II as clients.

While NatWest made several key errors, the force of the backlash – including against the group’s environmental and social policies – also had echoes of culture wars more commonly waged in corporate America, Spicer said.

Concern about political influence on the NatWest boardroom also comes at a time of heightened pressure from lawmakers on the wider banking sector, which has been accused by parliament’s Treasury committee of “profiteering” for failing to pass on more of the benefit of higher [central bank](https://www.financedigest.com/limited-support-for-central-bank-digital-currencies-in-global-investment-industry-survey.html "Limited support for central bank digital currencies in global investment industry survey") rates to struggling savers.

Harriet Baldwin, chair of the cross-party Treasury committee, said on Friday that [banks should be forced to let customers](https://www.financedigest.com/nearly-half-of-banking-customers-say-they-are-missing-the-human-connection-in-banking.html "Nearly half of banking customers say they are missing the human connection in banking") know when better savings rates are available elsewhere.

Given that the government, regulator and the [Governor of the Bank](https://www.financedigest.com/russian-central-bank-governor-speaks-after-hiking-rate-to-8-5.html "Russian central bank governor speaks after hiking rate to 8.5%") of England agree that action is required, the time for foot dragging and weak excuses is over,” she said in a statement.

## DANGERS OF ‘PURPOSE’

NatWest’s Rose stepped down on Wednesday after admitting to a “serious [error of judgment” in discussing Farage’s relationship with the bank](https://www.financedigest.com/metro-bank-former-top-bosses-fined-over-reporting-error.html "Metro Bank, former top bosses fined over reporting error") with a BBC journalist.

While this has been branded a breach of client confidentiality – considered a cardinal sin in banking – some CEOs of [rival banks have offered](https://www.financedigest.com/telecom-italia-boosted-by-rival-offer-for-landline-grid.html "Telecom Italia boosted by rival offer for landline grid") a modicum of sympathy.

That’s a pretty, pretty heavy price to pay for what would appear to be an error of judgment,” Bill Winters, CEO of [Standard Chartered](https://www.financedigest.com/bitcoin-could-hit-100000-by-end-2024-standard-chartered-says.html "Bitcoin could hit 0,000 by end-2024, Standard Chartered says"), said on Friday.

Politicians from both major parties criticised NatWest after an internal review emerged showing a Coutts reputational risk committee had said Farage’s views did not align with the lender’s own.

The review showed the committee decided to cut ties with Farage after a mortgage he had taken out had expired, and referred to the extra cost of managing the accounts of high profile individuals. It also cited [“risk factors](https://www.financedigest.com/helping-lenders-address-climate-risk-six-key-factors-to-consider.html " Helping lenders address climate risk: Six key factors to consider") including… controversial public [statements which were felt to conflict with the bank’s](https://www.financedigest.com/bank-of-england-statement-on-purchase-of-long-dated-bonds.html "Bank of England statement on purchase of long-dated bonds") purpose.

Samuel Gregg, economist with the American Institute for Economic Research, said the case showed why company leaders had to be wary of wading into public debates.

Banks have ended up caught in British [political crossfire because they have been ‘co-opted’ into supporting](https://www.financedigest.com/uk-financial-watchdog-urges-political-support-for-crypto-bans.html "UK financial watchdog urges political support for crypto bans") an array of causes, left and right, instead of focusing on delivering profits and shareholder value,” Gregg said.

But a board advisory consultant, who declined to be named, said [banks had little choice](https://www.financedigest.com/why-challenger-banks-need-to-capture-the-hearts-and-minds-of-todays-consumers-to-become-the-number-one-choice-in-the-retail-banking-sector.html "Why challenger banks need to capture the hearts and minds of today’s consumers to become the number one choice in the retail banking sector") but to engage in environmental and social issues as they were often pushed to do so from regulators and investors.

The government has kept up the pressure on the entire sector, and last week fast-tracked reforms that will force all lenders to delay and better explain account closures.

The Farage storm has driven renewed activity online from customers complaining they too have been ‘debanked’. A Facebook [group named](https://www.financedigest.com/wagamama-owner-restaurant-group-names-former-cadbury-executive-ken-hanna-chairman.html "Wagamama-owner Restaurant Group names former Cadbury executive Ken Hanna chairman") ‘NatWest CLOSED down my ACCOUNT’ has attracted more than 10,800 members.

However, data from watchdog the Financial Ombudsman Service showed complaints about account closures represented a tiny fraction of a [bank’s](https://www.financedigest.com/revolutionising-finance-exploring-the-impact-of-omnichannel-insurance-on-customer-experience.html "Revolutionising Finance: Exploring the Impact of Omnichannel Insurance on Customer Experience") overall customer base. Barclays received the most [last year](https://www.financedigest.com/naturgys-profit-rises-on-lng-gains-soothing-shareholders-by-pietro-lombardi-madrid-reuters-spanish-power-utility-naturgy-reported-on-monday-an-88-jump-in-profit-for-the-first-six-months-of.html "Naturgy’s profit rises on LNG gains, soothing shareholders By Pietro Lombardi MADRID (Reuters) – Spanish power utility Naturgy reported on Monday an 88% jump in profit for the first six months of the year, boosted by strong earnings at its liquefied natural gas (LNG) business, which could help it to win over restive investors. Earlier this month, the company said it would increase its dividend floor through 2025 while trimming expected investment, as it sought to make rewarding shareholders a priority. Pleasing them has become a focus as Naturgy considers changes that could reshape the company and after arguments over the potential appointment of a chief executive. Naturgy’s first-half net profit jumped to 1.05 billion euros (.16 billion), boosted by its liquefied natural gas (LNG) business. Shares were down 0.2% in mid-morning trading, bucking deeper declines, in particular for Spain’s blue-chip banks and utilities after a general election on Sunday produced no clear winner. Renta 4 Banco analyst Angel Perez Llamazares said Naturgy performed better than expected, adding “cash flows also beat our expectation,” and debt fell more than expected. After natural gas prices hit record levels last year, Naturgy said a fall in procurement costs this year and hedging gains had boosed profits. In the first half of the year, the company “exceeded the objectives of operating efficiency, cash generation, investment materialisation and debt reduction,” Executive Chairman and CEO Francisco Reynes said. After rival Iberdrola named a separate CEO last year, Naturgy is the only large energy company in Spain to combine the roles of executive chairman and CEO. Earlier this month, the company raised the dividend floor to 1.40 euros a share, from 1.20 euros. Operating profit (earnings before interest, tax, depreciation and amortisation) is expected to reach 5.1 billion euros, compared with a previous guidance of 4.8 billion euros. It said it was targeting net profit of 1.8 billion euros in 2025. Naturgy also relaunched its plan to split regulated infrastructure operations and liberalised energy businesses into two listed companies. The project had been suspended after the Ukraine war disrupted energy markets and analysts are still sceptical. “We believe it is unlikely that Naturgy will be able to implement its asset split in the short term and it is also unlikely that a big change in the shareholding of the company would occur,” said RBC analyst Fernando Garcia. ( = 0.8986 euros) (Reporting by Pietro Lombardi, editing by Inti Landauro and Barbara Lewis)"), at 274, followed by NatWest with 234.

## ROGUE COMMITTEES?

Experts [say other banks](https://www.financedigest.com/hungarys-otp-bank-pressured-by-ukraine-to-sell-russian-unit-ceo-says.html "Hungary’s OTP Bank “pressured” by Ukraine to sell Russian unit, CEO says") will now be scrambling to ensure their own policies and committees are behaving appropriately, to avoid further scandals.

“So far, this is specific to NatWest. But what you tend to get when any scandal blows up is a [negative halo effect](https://www.financedigest.com/negative-effects-of-technology.html "Negative effects of technology") – that means investors and activists start looking around at other institutions,” said City University’s Spicer.

The CEO of Britain’s biggest domestic bank Lloyds said on Wednesday the [bank’s own policies did not include looking at customers’ political or personal](https://www.financedigest.com/gen-z-finance-banking-on-success-with-personalized-outreach.html "Gen Z & Finance – Banking on success with personalized outreach ") beliefs.

Rupert Younger, founder of the Centre for Corporate Reputation at Oxford University’s Said Business School, said banks had to ensure their own committees did not “over-reach” and get involved in inappropriate areas.

“It’s a classic when you have a committee that decides it needs to become relevant, and it starts to flex its muscles in ways it shouldn’t,” said Younger. “In this case they created a reputation crisis that didn’t exist in the first place.”

(Reporting by Sinead Cruise, Iain Withers and Lawrence White; Editing by Daniel Wallis)


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