UK FCA findings on access to banking services by defence SMEs

The UK Financial Conduct Authority (FCA) has published findings from a multi-firm review of how small and medium-sized enterprises (SMEs) in the defence sector experience banking services. The publication is accompanied by a blogpost.

The FCA found that there is no regulatory barrier preventing banks from supporting lawful defence businesses. Even so, some defence SMEs have found the process of opening a bank account unnecessarily long and complex. The evidence points to friction and delay, rather than widespread exclusion. The FCA expects firms to take prompt action, including to:

• ensure that decisions to reject applications from defence SMEs are made on reasonable, properly considered grounds and demonstrate that they are proportionate, risk-based and consistently applied
• complete compliance checks efficiently and, where additional checks are necessary, keep applicants informed of progress and likely decision timescales (where legally permissible and appropriate)
• adopt approaches to offering and servicing accounts that reflect the specific circumstances and risks associated with individual defence businesses, and avoid blanket restrictions where a more tailored approach is possible
• ensure that reputational and environmental, social and governance-related considerations are clearly defined, consistently applied and supported by appropriate governance, noting that there are no sustainability rules preventing firms from serving defence customers
• consider whether they can identify and monitor defence SME customers with enough accuracy, including across wider supply chains and dual-use activity to understand how defence SME customers are being treated.

The FCA has written to firms that provide banking services to SMEs to share these findings and its expectations. It will monitor firms' responses through its supervision and will intervene where necessary. Firms should treat the report as a "point in time" publication, which the FCA will consider retired by December 2028.

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