Q1: In the Explanatory Memorandum (EM), you say: “It will therefore be at the discretion of the nine providers whether to continue to offer basic bank accounts to customers resident in the EU after exit day, or keep existing basic bank accounts of EU residents open, as would currently be the case for customers who are resident in non-EU countries … It could also affect existing holders of UK basic bank accounts who are resident in the EU, as UK providers will no longer be obliged to keep these accounts open, but may choose to do so.” Does this mean that UK citizens who may be resident in another EU state and who currently hold a basic bank account with a UK provider may find that the UK provider decides to close their accounts? If so, what options would be open to those UK citizens if they wished to retain the facilities previously available to them under the basic bank account with the UK provider?
A1: You are correct in saying that a UK citizen who is legally resident in the EU may hold a basic bank account with a UK provider, and that under this instrument a UK provider would be allowed to close their account. The provider is not obliged to close the account (the effect of the SI is that they are no longer obliged to offer it, but it does not prevent them offering it) but if they chose to do so they must give the customer at least two months’ notice in writing. In this event, the customer should be able to get a basic bank account with an EU-based provider, as all Member States are subject to the Payment Accounts Directive, which mandates the provision of basic bank accounts (or, payment accounts with basic features). However, the exact features of basic bank accounts in other Member States, and their specific eligibility criteria, will depend on how the Member State implemented the directive. Alternatively, if they wish to continue to hold a bank account with a UK bank, then they would need to explore other accounts offered to non-UK residents by UK banks.
Q2: In the EM, you say: “Based on conversations with industry, government expects this will affect very few accounts, in the region of the low hundreds.” What information does HM Treasury have about the account-holders likely to be affected? Do you know if these are UK citizens, and whether they are resident in the UK or elsewhere in the EU? How reliable is the estimate of “the low hundreds”? And does HM Treasury not regard this as a significant number of individuals who may be adversely affected by the changes proposed?
A2: The estimate of the ‘low hundreds’ refers to the estimated number of basic bank accounts provided by UK institutions which are held by customers living in the EU; no UK resident customers (whether UK citizens or otherwise) will be affected, as this SI ensures that UK basic bank account providers must continue to offer these to qualifying customers resident in the UK. The estimate was derived from data gathered by HM Treasury from some providers of basic bank accounts in the UK last year. HM Treasury asked these providers how many of their basic bank accounts were held by customers resident in the EU, and then a calculation was made to estimate the likely total number of projected accounts held by customers resident in the EU in March 2019, based on market share and the average monthly flow of basic bank account openings. HM Treasury does not know the citizenship of these customers. HM Treasury does not consider the estimate figure of the low hundreds to be a significant number because, to put it in context, there are almost 8 million basic bank accounts held at UK banking providers and almost 70 million current accounts held at UK banking providers. Furthermore, the customers affected should be able to access a bank account – either a basic bank account or another type of current account – at an EU provider, or another UK provider that is continuing to offer this service.
Q3: In the EM, you say: “HM Treasury has not undertaken a consultation on the instrument, but has engaged with relevant stakeholders on its approach to Financial Services legislation”. Have you received views from consumer representatives on these changes? If so, what views were expressed?
A3: HM Treasury published the draft instrument along with an explanatory policy note on 31 October and subsequently contacted consumer groups to notify them of the changes. HM Treasury has not received any queries or comments on the proposed changes by these groups, nor from any other consumer groups since publication.
12 November 2018