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NatWest was struggling to contain the fallout from the closure of Nigel Farage’s bank account on Wednesday night, as regulators announced investigations and shareholders lashed out at the board.
The bank’s chair Sir Howard Davies was the target of investor frustration after his failed attempt to keep chief executive Dame Alison Rose in place even after she admitted discussing Farage’s finances with a BBC journalist.
“He’s clearly not in charge,” said a top-20 investor. “Banking is about trust and confidence. That’s sacrosanct and starts with the tone from the top.”
Rose eventually resigned in the early hours of Wednesday morning under pressure from prime minister Rishi Sunak, only eight hours after Davies, who has been chair of NatWest since 2015 and is nearing the end of his tenure, said she retained the “full confidence” of the board.
The briefing Rose gave to the BBC led to an inaccurate report that his account at NatWest’s Coutts brand had been closed for purely commercial reasons. Farage was later able to prove that Coutts staff wanted to stop serving him because they found his opinions objectionable and a potential reputational risk to the bank.
The Financial Conduct Authority and the Information Commissioner’s Office both announced investigations into whether any rules or laws had been broken.
“The banking duty of confidentiality is over 100 years old, and it is clear that it would not permit the discussion of a customer’s personal information with the media,” said ICO head John Edwards. “Any suggestion that this trust has been betrayed will be concerning for a bank’s customers, and for regulators like myself.”
A second top-20 investor questioned whether Davies had cleared the statement of support with the government before its release. “My suspicion is that he will end up going, but probably shouldn’t have to,” the investor said.
According to people familiar with the matter, Davies did consult the government and regulators on the bank’s stance before releasing the statement on Tuesday.
One government official confirmed that conversations had been held between NatWest’s board, regulators and Treasury staff before the bank’s 5.40pm statement. Officials agreed that Rose was technically still a “fit and proper person” to run the bank.
However, when Sunak and chancellor Jeremy Hunt saw the full statements “in black and white” they concluded that the situation was untenable, the official said.
Soon after Rose resigned Treasury minister Andrew Griffith convened the country’s top bank executives who agreed to overhaul their procedures for closing accounts and for treating ‘politically exposed persons’. The government also wanted lenders to triple the notice period of terminations to 90 days to allow more time for an appeal.
“This would never have happened if NatWest had not taken it upon itself to withdraw a bank account due to someone’s lawful political views,” Griffith said. “I hope the whole financial sector learns from this incident. Its role is to serve customers well and fairly — not to tell them how or what to think.”
NatWest shares fell 3.7 per cent on Wednesday, making them the biggest faller on the FTSE 100 and extending their decline to almost 11 per cent this year.
The drop comes despite the boost in earnings the bank has received from rising interest rates. Rose’s resignation has also disrupted preparations for its second-quarter earnings on Friday. The government owns 39 per cent of the UK lender, a legacy of a financial crisis bailout, down from a peak of 71 per cent in 2016.
Paul Thwaite, chief executive of the bank’s commercial and institutional business, will take over for 12 months while the bank appoints a permanent replacement.
Farage said Rose’s resignation was not enough and said the bank should “put in place very quickly a new interim board”. He has also called for Coutts’s chief executive Peter Flavel to go.
Craig Mackinlay, a Conservative MP, called for the resignation of Davies as well as Flavel. “Both need to bear due responsibility for this unsavoury mess,” he told the FT.
Despite the pressure from shareholders and some MPs, senior government figures suggested that Davies’s position was more secure than Rose’s had been, given that she quit after admitting she personally leaked customer information in potential breach of data confidentiality laws.
“The issue was Alison — she briefed a journalist incorrect information,” said one Treasury figure.
Davies, an economist who steered the former Royal Bank of Scotland through a restructuring and return to profitability, said in April he would step down by July 2024, and the bank has already begun searching for his successor. He is approaching nine years as chair, which is the recommended limit under UK corporate governance rules.
One of the two shareholders said the Farage episode “has taken far too long and Nigel Farage had to campaign for the truth. That’s wrong. What about people who don’t have his platform? The board must have known the reason for his being excluded from Coutts.”
NatWest declined to comment. Davies did not respond to a request for comment.