What the new rules require

The updated regulations, confirmed by the Financial Conduct Authority, apply to all banks and payment service providers operating in the UK. HSBC, NatWest and Lloyds are among the major lenders affected, according to City AM.

Three changes matter most for business banking customers:

  • 90 days' notice before any account termination, up from the previous two-month (roughly 60-day) requirement.
  • A written explanation setting out the reasons for closure, delivered to the customer in a form they can retain and use.
  • A formal right to challenge the decision through the Financial Ombudsman Service (FOS), with the written explanation serving as the evidential basis for any dispute.

The rules apply to both personal and business accounts. De-banking, the practice of closing or refusing to open accounts, typically arises from a bank's own regulatory risk appetite rather than from any wrongdoing by the customer. For businesses, the consequences can be immediate and severe.

When announcing the changes, the UK government said the rules would "help give customers greater time to dispute closures and secure alternative banking arrangements," according to a statement published on gov.uk.

Why SMEs have been disproportionately affected by de-banking

Involuntary account closure hits smaller firms hardest. A large corporate with multiple banking relationships can absorb the disruption. An SME with a single business account faces a different reality: frozen payroll runs, missed supplier payments, and a cash-flow crisis that can threaten the firm's survival within weeks.

Several factors have made smaller commercial clients more vulnerable. Banks apply anti-money-laundering and know-your-customer checks across their entire book, but the cost of enhanced due diligence on a low-revenue SME account can exceed the profit that account generates. The rational commercial decision, for the bank, is to exit the relationship rather than bear the compliance cost.

Politically exposed persons (PEPs), individuals who hold or have held public office, face additional scrutiny under existing FCA rules. The most prominent UK de-banking case involved Nigel Farage, whose account at Coutts, the private bank within the NatWest group, was closed after the firm identified him as a PEP. Farage said the account was shut because the bank disagreed with his political views, as reported by City AM. The episode led to the resignation of NatWest's then chief executive, Alison Rose, in 2023 and triggered a Treasury consultation on de-banking practices.

But the Farage case, while politically charged, was not representative of the typical de-banking experience. For most affected businesses, the process has been quieter and harder to contest: a letter with minimal explanation, a short window to move funds, and no obvious route to appeal.

The Federation of Small Businesses has long argued that SMEs need clearer protections. The new 90-day notice period and the requirement for written reasons address two of the most common complaints: insufficient time and insufficient information.

How businesses should prepare

The extended notice window is a significant improvement, but 90 days is not as long as it sounds when a firm needs to open a new business account, migrate direct debits, update payment mandates and inform customers of new bank details.

Business owners and finance directors should consider several practical steps.

Maintain a secondary banking relationship

Holding a second business account, even a low-activity one, provides a fallback if the primary account is terminated. Several challenger banks and electronic money institutions offer business accounts with relatively fast onboarding.

Keep compliance documentation current

Many involuntary closures stem from incomplete or outdated know-your-customer information. Ensuring that company filings, director details and beneficial ownership records are up to date at Companies House reduces the risk of triggering a review.

Understand the dispute process

Under the new rules, the written explanation from the bank forms the basis of any FOS complaint. Businesses that receive a closure notice should review the stated reasons carefully, gather any evidence that contradicts the bank's assessment, and file a complaint promptly. The FOS does not charge complainants.

Monitor the notice period

The 90-day clock starts from the date the bank issues the notice, not from the date the customer reads it. Firms should ensure their registered address and contact details are correct so that notices are not missed or delayed.

What comes next in the regulatory pipeline

The 28 April rules sit within a broader regulatory programme that began with the Treasury's 2023 consultation on de-banking, launched in the wake of the Farage episode. Legislative backing came through amendments to the Financial Services and Markets Act, which gave the FCA the power to set minimum notice periods and disclosure requirements.

Further measures are expected. The FCA has signalled interest in how banks assess risk on smaller commercial clients, particularly in sectors that attract higher compliance scrutiny, such as money service businesses, cryptocurrency firms and charities operating in high-risk jurisdictions. Any tightening of the rules around PEP classification could also affect how banks treat directors of SMEs who hold local government or public-sector roles.

The direction of travel is clear: regulators want banks to make de-banking decisions that are proportionate, transparent and contestable. For lenders, that means investing in more granular risk assessment rather than relying on blanket exits from client categories deemed too costly to monitor. For businesses, it means a stronger hand in a relationship that has historically been tilted heavily in the bank's favour.

None of this eliminates the risk of involuntary closure. Banks retain the right to terminate accounts where they identify genuine financial-crime concerns, and the new rules explicitly preserve that discretion. But the combination of a longer notice period, mandatory written reasons and a formal dispute mechanism represents the most significant shift in account-closure protections in recent years. SMEs that have felt powerless in the face of a de-banking letter now have, at minimum, more time and more information with which to respond.