Thursday briefing: What the Coutts/Farage row reveals about banking in Britain

11 months ago 50

Good morning.

It has been almost a month since Nigel Farage launched an almighty tirade against NatWest-owned Coutts – a British private bank and wealth manager whose elite client list includes King Charles and most of the royal family. It was relatively unknown to most people until it attracted the ire of Farage, who first claimed the closures were linked to his status as a politically exposed person (PEP) and claims in the Commons that he had received payments from Moscow’s state-funded broadcaster Russia Today.

For weeks, the bank said the account was closed simply because he did not have the funds any more to bank with it – briefing the BBC that he had merely fallen below the £1m threshold of borrowings or investments after paying off a mortgage. But that was only part of the story. It probably did not expect that Farage would publish internal communications, that he obtained through a subject access request, showing that alongside those financial thresholds, the bank was concerned about his allegedly “xenophobic, chauvinistic and racist views” and believed maintaining his accounts posed a risk to the bank’s reputation. In the days since, NatWest, the high-street bank that owns Coutts, has been plunged into crisis. Its shares have dropped by 3% and its CEO, Alison Rose, resigned in the early hours of Wednesday morning.

For today’s newsletter, I spoke to the Guardian’s banking correspondent, Kalyeena Makortoff, about this twisty story, what it says about the state of banking in modern Britain and the surprising power Nigel Farage still wields in Westminister. That’s right after the headlines.

Five big stories

  1. Music | Sinéad O’Connor, Irish singer of the 1990 hit Nothing Compares 2 U, has died aged 56. Her death has stunned Ireland and the music world, and came 18 months after her 17-year-old son Shane died after leaving a hospital while on suicide watch. O’Connor had three other children. The musician, also a vocal activist, experienced mental and physical health problems, which she chronicled in social media posts and interviews.

  2. Africa | Soldiers in Niger say they have removed President Mohamed Bazoum from power, after armed troops earlier blockaded the presidential palace in Niamey, the capital. A group of soldiers made the announcement on the west African country’s national television late on Wednesday. Niger is considered a linchpin for western-aided efforts to stabilise the Sahel region.

  3. MeToo | Kevin Spacey has been cleared of sexual assault in one of the UK’s most high-profile #MeToo trials. The 64-year-old Oscar-winning actor wept as he was found not guilty on Wednesday of sexually assaulting four men after a four-week trial at Southwark crown court, in London.

  4. Environment | 2022 was the warmest year on record in the UK, the Met Office has confirmed, with experts warning the unprecedented heat is a sign of things to come. The news comes after former Conservative minister Zac Goldsmith said Michael Gove is a “monster” if he continues to rubbish green policies while fully understanding the urgency of the climate crisis.

  5. US | The Senate Republican leader, Mitch McConnell, briefly left his own press conference on Wednesday after stopping his remarks mid-sentence. McConnell appeared to freeze and stared off into space for 20 seconds. He returned and answered questions from the press. Asked later about what happened, McConnell said he was “fine”.

In depth: Farage has seemingly been vindicated – so what happens next?


NatWest-owned Coutts bank.
NatWest-owned Coutts bank. Photograph: Dan Kitwood/Getty Images

The timeline

When this story initially surfaced there was a lot of partial and conflicting information flying around. This is how it happened:

At the end of June, Nigel Farage said he had been ousted from a bank – at the time he did not name which bank but it was later identified as Coutts. He added that he had tried to open accounts at nine other banks but had been denied on the basis that he was a politically exposed person. Given his storied career railing against the establishment, Farage knew exactly how to push this story. He uploaded a six-minute-long video on Twitter alongside a caption that read: “The establishment are trying to force me out of the UK by closing my bank accounts.”

Kalyeena explains: “This is an issue that has been brought up for quite some time by a number of MPs, so it wasn’t hard for him to start getting political traction. Hence, you get the government instructing the regulator to accelerate their review.” And while Farage was offered an alternative bank account with NatWest’s high street arm, the timing of the offer was called into question. Farage said NatWest only came to him after he threatened to go public, and the offer was not clear to have included business banking services.

And then there was the fateful BBC report that would lead to Alison Rose’s resignation. It cited sources who said that the decision to close Farage’s account was a commercial one because he had fallen below the threshold that requires clients to have £1m in investments or borrowing or £3m in savings, and that it had nothing to do with his political views. At this point, it became clear that the bank in question was Coutts. Farage then reverse Uno’d the situation by publishing a 40-page document that he had obtained via a subject access request. The document contained all the evidence Coutts gathered about him to give to its wealth reputational risk committee. The conflicting information bumped up the story to front page news.

Many things were listed in the document, including his financial viability to bank with Coutts, but it did also suggest that Farage posed a reputational concern because of what was perceived as “racist, chauvinistic and xenophobic” views. “It’s important to note that while Farage is a very contested figure, at no point has he been charged with illegal hate speech, for example. He stayed on the legal side of that,” Kalyeena says.

The government responded swiftly to Farage’s accusations, announcing a series of new laws that could be drawn up to stop banks closing customers’ accounts on the basis of political views. Farage also criticised NatWest’s chief executive for allegedly breaching client confidentiality, after it emerged she sat next to a BBC reporter the night before the story regarding his financial thresholds emerged.

Farage was seemingly vindicated. NatWest bosses sent him in an apology in a letter, as did the BBC, and senior government officials, including the prime minister, rallied around him vowing to push through and strengthen legislation to provide more transparency around bank account closures. As the political pressure mounted, the bank’s chief executive fell on her sword and resigned, just eight hours after she had admitted to being the source of the BBC’s story and the board pledged its full confidence in her.


Were any laws broken?

On the one hand, all UK businesses, including banks, have the discretion to decide who to serve as customers. That is considered a commercial decision. The Financial Times has reported that under the guise of “de-risking”, banks have been dropping customers who pose a reputational risk for at least a decade. On the other, all large banks are required to provide basic, fee-free banking services to everyone – though this is not what Farage was looking for.

Businesses cannot discriminate on the basis of protected characteristics such as sex or ethnicity, and that also includes political beliefs. “Some people might find it a bit ironic, given Nigel Farage’s position on the EU, that we have inherited EU laws that specifically say you must provide banking services to any individual and you cannot discriminate on the basis of protected identities as well as political beliefs,” Kalyeena says. “And so this is where the debate started, because how do you start parsing this out? What counts as a political belief? And what starts to look like a reputational risk to a business? I don’t think those boundaries were incredibly clear.”


Why it matters

It might be hard to get invested in a story that is effectively about a wealthy person who has been told that he cannot have a swanky, executive bank account but there are important ramifications here. A CEO of a massive bank resigning this quickly is incredibly rare. Kalyeena says that she has not seen a story pan out like this during her entire career covering banking: “Keep in mind that this is a bank that was bailed out during the 2008 financial crisis and is still 38.6% owned by the taxpayer, meaning that the government is the largest shareholder of the group. There have been suggestions that perhaps that if this was a different bank like Lloyds or Barclays, it wouldn’t be as easy to put political pressure on them. Now that is completely hypothetical, but some people have been drawing parallels.”


What could happen next?

Other banks have insisted that they have robust, sound rules to ensure things like this do not happen. However, there is little doubt that many of them are scrambling to make sure that nothing has fallen through the cracks. While banks are under obligation to gather information about their customers, to ensure they are making accurate risk assessments, “it may transpire that a number of public political figures are starting to file their own subject access requests and accessing files that were never meant for public consumption, but that may reveal quite embarrassing things about what the banks have gathered about them,” Kalyeena says.

In terms of this saga, the story is likely to rumble on. Farage is pleased with the apologies and the resignation of NatWest’s chief executive, however he is continuing to call for more heads to roll – specifically the rest of the board. NatWest’s chairman, Howard Davies, was already on his way out, but this may accelerate his exit: “That raises questions as to whether you want a systemically important bank in the UK to be without any sort of continued leadership,” Kalyeena adds.

And it is important to contextualise Farage’s complaints. He was offered alternative banking so his claims about being “de-banked” need to be treated with caution; there seems to have been no possibility he would have been left entirely without a bank account. And when he complained, Farage was given a meeting in front of the City minister to air his grievances and the government has been bending over backwards to change laws because of his complaints. Many people have their accounts closed with no explanation – others have difficulty opening one in the first place because of their housing or migration situation. “It is very interesting to see the sway that he continues to have within the government,” Kalyeena says.

While this story has unfolded quickly, untangling this complicated web will not happen overnight. Assuming that NatWest continues its independent review, information will continue to come out, and Kalyeena points out that there has not been a regulatory decision on this yet, nor has there been a chance for an independent body to review the issue in full. Keep an eye out on the Guardian’s business section for the latest updates on this story.

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What else we’ve been reading

Loyalty cards
  • Love them, hate them, be deeply suspicious of them – loyalty cards (pictured above) are having a cost of living moment as retailers offer discounts rather than just bonuses through their schemes. The Guardian’s consumer editor, Hilary Osborne, covers the reductions, data collection and top deals. And ICYMI, Adrian Chiles was very persuasive in 2022 on why to cut up your loyalty card. Craille Maguire Gillies, production editor, newsletters

  • Gina Martin led a significant campaign that made upskirting illegal in England and Wales. She no longer wants to change the law though, pivoting her primary focus to prevention not criminalisation: “My immediate safety has been improved by the incarceration of men who want to hurt me, but the system that did it will not make them less likely to harm me, others or themselves when they come out,” Martin writes. Nimo

  • Get past some of the florid prose – “Altman’s large blue eyes emit a beam of earnest intellectual attention …” – and this Atlantic profile of OpenAI CEO Sam Altman will bring you up close to the most powerful person in the area right now, and one who believes that the AI revolution will lead to “a new kind of society”. (TL;DR? There’s an hour-plus-long audio version on its site.) Craille

  • For all Selling Sunset fans out there: Katie Cunningham has interviewed G Flip, Chrishell Stause’s new spouse. They discuss G Flips newfound stardom and their latest album. Nimo

  • I love this gallery of intimate, vulnerable photographs of parents – the artists’ own and others. And that Jell-O-green carpet in Larry Sultan’s shot of his elderly parents’ home is a blast from the past. Craille

Sport

Lina Nielsen of Great Britain.
Lina Nielsen competes in the Women’s 400m Hurdles final in June’s Diamond League meeting in Lausanne. Photograph: Alexander Hassenstein/Getty Images

Athletics | Furious British athletes have accused the national federation of “stealing” their chance to compete at next month’s world championships, with UK Athletics set to rip up their invitations. At least 19 British athletes (Lina Nielsen pictured above) will be told they cannot take their place at the sport’s showpiece tournament despite qualifying through the world rankings.

Football | In the last few hours the USA and the Netherlands have played to a 1-1 draw in Wellington, meaning the Group E winner will most likely be decided by goal difference. The Republic of Ireland’s first Women’s World Cup campaign ended in heartbreak as Canada came from behind to beat Vera Pauw’s side 2-1 in Perth. Spain eased into the last 16 with a ruthless 5-0 victory over Zambia. Two goals in two first-half minutes gave Japan a 2-0 win over Costa Rica to secure the 2011 champions a spot in the knockout rounds.

Tottenham | Spurs have sought to make it plain that Joe Lewis is no longer the owner of the club after he was charged on Tuesday with insider trading by US federal prosecutors. The 86-year-old Bahamas-based billionaire was bailed by a judge in New York on Wednesday after pleading not guilty to charges of giving insider trading tips. He stepped back from his publicly stated position at Tottenham on 5 October 2022.

The front pages

Guardian front page, Thursday 27 July 2023
Guardian front page, Thursday 27 July 2023 Photograph: Guardian

“PM ‘damaging UK plc’ in row over exit of NatWest chief” says our Guardian front-page lead headline this morning. The Daily Telegraph has “NatWest may have broken the law over Farage” while the Financial Times says “NatWest fails to stem Farage fallout as shareholders vent anger on Davies”. “Banks must be reined in after NatWest crisis, ministers told” – that’s the i. The Daily Mail continues its campaign, “PM: throw the book at corrupt migration lawyers”. The Mail’s picture slot is for the late Sinéad O’Connor whom it calls “troubled singer” to imply something dark. “Nothing compared” says the Daily Mirror with a full-page memorial photograph in monochrome. “Singer Sinéad dead at 56” says the Metro, also putting that “troubled” hint in its page furniture. Top story in the Daily Express is “Inheritance tax raid must be ended”.

Today in Focus

Wildfires turn the sky orange in Rhodes, Greece.
Photograph: Anadolu Agency/Getty Images

Climate crisis up close: a week of wildfires in Rhodes

Holidaymakers on the Greek island of Rhodes found themselves evacuated from hotels and sleeping in school halls as wildfires raged nearby. As they make plans to return home, residents and business owners are counting the cost of what will be an expensive recovery. Rachel Hall reports

Cartoon of the day | Steve Bell

Steve Bell on Nigel Farage’s BBC interview with Nick Robinson
Illustration: Steve Bell/All Rights Reserved

The Upside

A bit of good news to remind you that the world’s not all bad

 Greg Baker/AFP/Getty
Research suggests iron and steel industry waste could be used to lock away carbon for millennia Photograph: Greg Baker/AFP/Getty Images

When looking for solutions for the climate crisis, the iron and steel industry is unlikely to be a first port of call. But research presented at the Goldschmidt conference in Lyon this month suggests that slag, the waste produced by industry, could be used to lock away carbon dioxide for thousands of years. About 400m tonnes of slag is produced annually – if the research proves robust, it could be part of a large carbon capture scheme helping to take C02 out of the air and lock it in the ground, and thus help reduce global heating.

Sign up here for a weekly roundup of The Upside, sent to you every Sunday

Bored at work?

And finally, the Guardian’s puzzles are here to keep you entertained throughout the day – with plenty more on the Guardian’s Puzzles app for iOS and Android. Until tomorrow.

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