Sudden withdrawal by British banks of the accounts of customers in the EU

Sudden withdrawal by British banks of the accounts of customers in the EU

On 25 September 2020, Members of the European Parliament Caroline Nagtegaal and Liesje Schreinemacher (MEPs) of the Renew Europe Group posed a written parliamentary question to the European Commission:

“Recently, a number of UK banks have informed both retail and corporate customers in the EU that their UK bank accounts will be closed. Without an agreement on the type of future trade relationship with the UK (no-deal Brexit), UK banks will lose their passporting rights. A number of banks have therefore also opened offices within the EU (post-Brexit) in order to continue providing services. However, even banks with offices on the continent are now closing accounts.

1. Can the Commission state the grounds on which the accounts are being closed and whether those grounds are legitimate?

2. Does the Commission regard this as an inevitable consequence of a ‘no-deal Brexit’? Or does it see ways of helping those concerned without undermining its Brexit negotiating position?

3. Why is there a transitional regime in place for insurers, which can continue to provide services for 24 months, but no such regime in place for banks?”

On 22 January 2021, Financial services, financial stability and Capital Markets Union Commissioner Mairead McGuinness responded on behalf of the European Commission stating: “EC law does not prevent EU residents from holding bank accounts in a third country. The closure of payment accounts by some United Kingdom (UK) banks may depend on different grounds, which may be fiscal, commercial or related to national laws.

It may depend on the type of contractual relationship between the UK bank and its customer, on the nature and the location of the service provided to the customer, or on specific banks’ policies.

The legitimacy of these closures depends very much on the grounds and situation, which may vary from one bank to another or from one customer to another. As the UK no longer applies single market rules since 1 January 2021, accounts held in the UK may be subject to different arrangements; customers should check this with their banks.

At the end of the transition period, there will be regulatory change for financial services irrespective of an EU-UK agreement: as the UK is leaving the EU Single Market, UK banks will lose their right to provide services across the EU based on their UK authorisations (‘passporting’).

However, they have various ways to continue to serve their EU-based clients, including seeking establishment in the EU from the competent authorities. The Commission has repeatedly invited firms to finalise their preparations by the end of 2020, including in its latest Communication on readiness of 9 July 2020.

The example referred to here is a national contingency measure for insurance (run-off). The need for such measures should be limited only to accompanying the termination of the residual stock of existing contracts.

Since firms have had ample time to prepare and to seek the necessary EU authorisations, the stock of such residual contracts appears to be limited.”

Source: https://www.europarl.europa.eu/doceo/document/E-9-2020-005254_EN.html

Photo Credit : https://pixabay.com/photos/breakdown-brexit-britain-british-2941902/

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