'Banking blackout' has left small charities locked out of their accounts

Organisations say that tighter banking restrictions coupled with a period of financial inactivity because of the pandemic has meant they have not been able to access their accounts

Reduced capacity and tighter restrictions in the financial industry has created a “banking blackout” that has left many small charities locked out of their accounts or unable to open a new one, organisations have told Third Sector

Concerns have been raised by charitable groups and membership bodies that smaller organisations that might have been inactive during the lockdown but later returned to fundraising activity found their accounts closed or frozen due to alleged inactivity.

Others have reported being unable to apply for new accounts due to almost none of the big banking services providers accepting fresh applications, charities said. 

This had led to many being unable to pay in grant money, or individuals using their personal accounts to accept donations, organisations told Third Sector

Sue Spiller, chief executive of Sobus, a community development agency for Hammersmith & Fulham in west London, said the only accredited lender she could find that was accepting applications told her she was not eligible because the organisation could not name a person with significant control.

“We would have to rewrite our constitution,” said Spiller.

She said her organisation had acted as a bank for some of its members because their account had been closed, or on behalf of new groups that had sprung up in the community as a result of the pandemic.

Jane Arkley-Crouch, good neighbour network development officer at Community Action Suffolk, said many new groups had joined its network during the pandemic.

“Due to the banking blackout we’ve found many of these groups have been unable to find a bank allowing new accounts to be set up, or they have fallen through the cracks and find themselves ineligible for new accounts,” she said. 

Olivia Barker, chief executive of the Small International Development Charities Network, said several of its members had encountered this issue.

“The majority of newly registered charities are struggling to open bank accounts at the moment,” she said. 

Several international currency trading brokers had also been freezing accounts for sending funds overseas, she said, meaning it was a tough time for small international development charities in particular.

Rita Chadha, chief executive of the Small Charities Coalition, said her organisation had been in touch with the Charity Commission and the government to see what could be done to help.

“We have at least two to three queries a week on the helpdesk about people having problems opening a bank account.

“We are reaching out to all the large high street banks and asking them for a meeting and are waiting to convene that for December,” she said.

She said the SCC hoped to hold a roundtable discussion next month and encouraged anyone interested in taking part to get in touch with it directly.

UK Finance is the collective voice for the banking and finance industry and represents more than 250 firms.

In a statement it said: "The banking and finance industry is working hard to support customers through these challenging times, including providing an unprecedented level of support through government-backed lending schemes.

"All banks want to provide the best possible service to their customers and a decision to close or temporarily freeze an account would be made according to the specific circumstances of the case.

“We appreciate just how important it is for organisations in the third sector to have access to banking services and would urge these customers to contact their provider as soon as possible if an account has closed unexpectedly."

A spokesperson for the Financial Ombudsman Service said: “If a charity believes it has been treated unfairly by its bank, it should make a complaint to the bank in the first instance.

“If the charity isn’t happy with the response, it can bring a complaint to our service and we’ll see if we can help.”

FOS guidance on how to make a complaint can be found here.

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