Online Challenger Banks

Lord Stirrup Excerpts

Monday 27th April 2026 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and for our brief conversation last week about some of the issues he has experienced. He will be aware that many of the issues he raises are ultimately commercial decisions for individual financial institutions, and how they choose to communicate with their customers and potential customers are largely decisions for themselves. He will know that, where a bank decides not to allow an account, it can disclose why it has made that decision, but it is not generally required to do so or to provide detailed reasons. In some cases, banks are legally constrained in what they can or are able to say. I think the noble Lord is interested in the use of AI in some of these decisions. The FCA is clear that automation does not remove a firm’s responsibility; it must retain effective oversight of automated decisions and ensure that decisions are fair and made in accordance with regulatory requirements. But, as I say, the decision about how and whether to communicate that is largely a commercial one for the individual financial institution.

[Lord Stirrup (CB)]

My Lords, has the Minister seen reports that members of defence companies are being refused accounts with challenger banks? The whole issue of de-banking, the difficulty that defence companies are having in finding suitable accommodation to rent, and the removal, with the assistance of the Edinburgh Council, of Leonardo’s recruiting advertisements from the city’s trams are all surely indications that ESG concerns are being used for overtly political purposes. Is this not yet another baleful consequence of the Government’s failure to lead a national conversation on defence, which they themselves admitted was so badly required?

[Lord Livermore (Lab)]

I thought I was going to be able to agree with everything the noble and gallant Lord said—right up until the last sentence. I agree with 99% of his question, and I absolutely agree that access to finance for defence firms is incredibly important. The instances that he cites are troubling, and I share his concerns about them. Access to finance is a significant issue for defence firms, particularly SMEs. No company should ever be denied access to financial services solely on the basis that it works in the defence sector, and the banking sector should never take a blanket approach to any one sector. The Government are actively engaging with banks to ensure that they understand the importance of the defence sector and the FCA’s work to understand why banks might close or reject accounts. Where it has found areas in which firms need to improve customer outcomes, the Government expect firms to consider the FCA’s findings.