The share price of Coutts’ parent bank, semi-state owned Natwest, has slumped 8% over the past 10 days, wiping £1 billion off its market cap and generating juicy returns for short-selling hedge funds.
The still-blossoming scandal surrounding the prestigious London-based private bank Coutts’ decision, around a month ago, to close Nigel Farage’s bank account has already claimed two senior scalps — those of Dame Alison Rose, the CEO of Coutts’ parent bank and “Big Four” lender, Natwest (formerly known as the Royal Bank of Scotland) and Coutts’ chief executive Peter Flavel. Rose resigned on Wednesday (July 26), Flavel was pushed on Thursday (July 27).
Dame Rose was the first ever women to become CEO of a major British bank after leading a government investigation into the under-representation of women in business. She was at the helm of Natwest for four years before losing her job this week for leaking confidential details of Farage’s finances to the BBC. It was the Sunak government, which claims to have been shocked by the scandal despite holding 39% of the formerly bailed out lender’s stock, that made the final call.
Just hours after the bank expressed full confidence in chief executive Alison Rose, aides to Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt began to spread the word that she had to go. Officials told reporters that the government had significant concerns about Rose staying on after she admitted leaking information about the closure of accounts held by Brexit-campaigner Nigel Farage.
Following her “resignation” from Natwest, Dame Rose also lost her advisory roles on the prime minister’s business council, energy efficiency taskforce and net zero council. But even that was not enough to sate Farage’s desire for retribution. In an interview on BBC Breakfast Time on Wednesday the former UKIP leader said the whole board should go:
“She’s gone and it is right that she has gone. However, I think this brings into question the whole of the board. Frankly, because of how they have behaved, I think they should all go.”
Share Price Slump
Natwest’s share price has slumped 8%, wiping £1 billion off its market cap, much of which is propped up with public funds, and generating juicy returns for short-selling hedge funds . The rout began in earnest on July 19, the day Farage revealed the ace up his sleeve: a 40-page dossier of internal Coutts emails and memos detailing the reasons behind the bank’s decision to close his account, which was published in full by the Daily Mail and the Daily Telegraph.
This, of course, is not the first time that the crème de la crème of the British establishment has massively underestimated Farage and has paid a heavy price as a result. The last time culminated in the UK’s rather disorderly exit from the European Union — an outcome that most global financial institutions, bar certain tax-avoiding hedge funds, as well as the City of London Corporation feared and publicly opposed.
This time, the ensuing scandal has already lead to the resignation of a Big-Four bank CEO who only months ago received a damehood for her services to the financial sector. It has caused yet more reputational damage to a bank whose reputation has never recovered from the woeful mismanagement and myriad scandals that preceded its collapse and subsequent bailout in 2008. It has also drawn much-needed public attention to a long-standing but accelerating trend (not just here in the UK but in the US and presumably other parts of the world): the “de-banking” of people with politically inconvenient views.
Given their acute political sensitivity, it is unlikely that the Coutts and Natwest boards took these actions without the tacit knowledge of UK banking regulators and the Bank of England, as Alexander Mercouris noted in a recent episode of The Duran. It is also hard to imagine that government officials were left out of the loop given the State’s part-ownership of Natwest.
Since the scandal has broken, the Financial Services Minister Andrew Griffith has pledged to instruct banks and fintechs, including the Big Four (NatWest, Lloyds, HSBC and Barclays), to take action to ensure customers do not lose access to services over their political views. The government has also outlined reforms that will compel banks to provide more notice of account closures and explain their motives. How these processes involve and indeed whether the government actually keeps to its word remains to be seen.
For those outside the UK who are unfamiliar with this story, a little background:
In late June, Farage went public with the news that a bank — later revealed as Coutts, one of the UK’s oldest and most prestigious private lenders whose clients include members of the royal family — had closed his account without warning. While Farage said the bank had given no reason for the action, he believed it was because of his former designation as a “politically exposed person” (PEP). PEPs pose a higher risk for financial institutions due to their greater potential exposure to involvement in corrupt practices.
In a six-minute video posted on Twitter, Farage said that losing his bank account was the equivalent of being a “non person” and that the decision may “fundamentally affect [his] future career and whether [he] can even go on staying living here in this country.” Farage also accused the establishment of “trying to force” him out of the UK “by closing [his] bank accounts.” In a second Twitter video, he said his attempts to open a new bank account elsewhere had been rebuffed by nine other companies.
Crossing Big Ethical Red Lines
Coutts and Natwest rejected Farage’s accusations that their decision to close Farage’s account was politically motivated and they began spreading stories across the media that the real reason was that Farage simply wasn’t rich enough — an allegation that Farage roundly denied. The bank requires clients to have at least £1 million in investments or borrowings, or £3 million in savings. In divulging a customer’s confidential account information to the BBC’s business editor Simon Jack, Dame Rose crossed some pretty big ethical red lines and may have actually broken the law, though she will still no doubt walk away with a very handsome severance package.
Also, what she said was not true, or at least not entirely true. This we now know because when Farage levelled his first accusation against Coutts, what he didn’t say was that he had been able to obtain, through various legal channels, a 40-page dossier from Coutts that reveals, in exhaustive detail, the actual deliberations that informed the bank’s decision to close his account. As Mercouris posited, Farage may have also had contacts inside the bank feeding him information.
The dossier includes 36 pages of background information presented to the bank’s Wealth Reputational Risk Committee in November 2022, minutes of the meeting and an email exchange confirming the decision to “exit” him as a customer. In direct contradiction to the bank’s public claims, the dossier clearly states that Farage is a “commercially viable customer” but his views “do not align with [Coutt’s] values”. For example, the bank cites his retweet of a Ricky Gervais joke and his friendship with Novak Djokovic to conclude that he is both “xenophobic and racist”.
Interestingly, the file also reveals that Farage was a “lower risk PEP (politically exposed person)” and Coutts was planning to “declassify him as a PEP” altogether on the next review since he was no longer associated with any political party. But given his mortgage was set to expire in July 2023, the bank decided ahead of time that it “did not have the appetite to renew his mortgage or provide banking facilities”. Without a mortgage, Farage fell below the bank’s financial threshold.
As mentioned here a couple of weeks ago, there are plenty of other Coutts customers whose accounts are also below the necessary financial threshold yet they have not been threatened with account closure. Presumably they don’t pose the same reputational risk as Farage. From the dossier:
The relationship has been below commercial criteria for some time and upon review of Nigel’s past public profile and connections, the perceived risks for the future weighed against the benefit of retention, the decision was taken to exit upon repayment of an existing mortgage.
The (Alleged) Russian Connection
Also noteworthy are the bank’s concerns about Farage’s alleged Russian links. One of the key “risks” the bank identified was Farage’s “potential connections” to Russia. The “alleged Russian ties/connections increased post the Russian invasion of Ukraine.” The notes claim he has “regularly been seen to be pro-Russia/pro-Putin” and that “even following the invasion, he did not criticise Putin but instead blamed the EU and NATO”. That said, it could not unearth “any evidence of direct Russian regime connection”.
It also stated:
“Despite the adverse press, NF has not been formally charged of any wrong doing, and is not subject to regulatory censure.”
Yet, the bank concluded that continuing to do business with Farage was “not compatible with Coutts given his publicly-stated views,” adding bizarrely that the decision was “not political… but centred around inclusivity and purpose.”
As mentioned earlier, arguably the most important impact of this scandal so far is the public debate it has engendered around the issue of debanking, which in turn is pushing the government into enacting legislation to protect bank customers. Certain figures in the media have tried to downplay the importance of the scandal by arguing that Farage is an attention-seeking chancer with loathsome views who is uniquely adept at whipping up a populist storm. They also downplayed the broader risk posed by banks closing customer accounts on political grounds.
They also argue that Coutts is hardly what you’d call a high street bank — as the financial commentator Frances Coppola said in a debate with Farage on Newsnight, “it’s a specialist provider of private banking services to very rich people” — and has every right to choose which people it wants to do business with. Former BBC news presenter Emily Maitlis offered a similar line of reasoning while exhorting her audience to “put aside the leaking of customer confidentiality,” which, she said, “we probably all agree is egregious”:
Lost us at ‘if you put to one side the leaking of customer confidentiality’.
— STOPCOMMONPASS 🛑 (@org_scp) July 26, 2023
Maitlis conveniently ignores Farage’s claims that nine high street lenders refused to open an account for him, and Natwest only did so after the scandal around Coutts’ debanking of Farage had erupted.
And this is hardly a one-off event: as I reported a couple of weeks ago, banks on both sides of the Atlantic are increasingly debanking their customers, often without explanation. I gave the example of California-based writer, activist, and social and political commentator Elad Nehorai, whose political views and ideals could not diverge more from those of Nigel Farage. Yet he, too, had his account at Bank of America, his bank of many years, summarily closed with no apparent warning or explanation. And Bank of America is hardly what you’d call a “posh bank”.
Maitlis’ claim that a bank’s services should not be considered a public utility is also dangerously wrong. Without a bank account, it is almost impossible to participate in the economy. And it is getting more difficult as cash becomes harder and harder to access and use. As Alex Lo writes for South China Morning Post, “Banking is a fundamental utility like water and electricity, and that’s precisely why democratic societies are increasingly turning to its use as a method of censorship and repression.”
Unfortunately, this problem is likely to get worse rather than better if/when central bank digital currencies (CBDCs) go live. Given their programmable nature, CBDCs will make it even easier for commercial banks, through their prospective role as “public interface providers” (PIPs), to debank politically inconvenient customers, at the behest of the government or central bank.
 Regulatory filings unearthed by The Telegraph reveal that hedge fund Marshall Wace had the biggest short position in the lender’s shares, which apparently dates back to the global banking jitters earlier this year. One of the hedge fund’s co-founders, Sir Paul Marshall, is also the owner of GB News, one of Farage’s fiercest defenders and one of most vocal critics of Coutts’ actions.
 In the US this week, another high-profile figure, Joseph Mercola, who was recently described by the New York Times as the “most influential spreader of Coronavirus misinformation online”, had his personal and business accounts closed by JP Morgan Chase — again, it seems, without warning or explanation. Steve Rye, CEO of Mercola’s company, Mercola Markets, told The Florida Standard that Mercola’s name was included in the Twitter Files. The bank has also apparently closed Rye’s account, his wife’s account and his son’s account.