Major high street lenders including Nationwide, Lloyds, HSBC and NatWest will be obliged to comply with new de-banking regulations from 28 April, affording customers greater protection when their accounts are closed.

The rules stipulate that banks and payment service providers must give at least 90 days’ notice before shutting down an account or terminating a payment service, up from the previous two-month requirement.

Banks will also need to provide a clear explanation to customers in writing, so people can challenge decisions, such as through the Financial Ombudsman Service.

The new rules will give customers more time to challenge decisions they disagree with and find a new bank if their account is closed. This will support small businesses which have complained about their account being closed without reason at short notice – leaving them no time to complain or find a replacement bank.

The changes apply to new contracts agreed from 28 April onwards and also cover the closure of basic personal bank accounts.

Labour first announced the measures in April 2025 as part of efforts to prevent customers being left without access to banking services at short notice.

De-banking refers to the practice of banks closing accounts or refusing to open them for certain customers, typically due to regulatory requirements, risk management considerations or profitability concerns.

The practice can affect both individuals and businesses, particularly where customers do not have alternative accounts in place.

The issue came to national prominence in 2023 after Coutts, part of NatWest Group, closed Nigel Farage’s accounts - a high-profile case later found to involve assessments of his political views rather than the commercial criteria initially cited.

Banks maintain that closures are sometimes necessary to manage risks such as money laundering, terrorism financing and reputational damage, but concerns have been raised about instances where accounts have been shut without adequate explanation.

Under the new regulations, banks will be required to provide customers with a written explanation when closing an account.

This will enable customers to contest decisions they consider unjust, including referring complaints to the Financial Ombudsman Service.

Labour stated that the changes are designed to give customers greater time to dispute closures and secure alternative banking arrangements.

Small businesses are anticipated to benefit following concerns raised about accounts being shut down with minimal notice.

Upon announcing the policy, economic secretary to the Treasury Emma Reynolds said: “Delivering economic security for working people is at the heart of our Plan for Change and strengthening protections against debanking will protect people’s and businesses’ access to banking services.

“Under the new rules, customers will receive more notice of account closures, be entitled to an explanation as to why their account has been closed and have more opportunity to challenge such decisions.”

The nine largest personal current account providers in the UK are already legally required to offer basic personal bank accounts to people who legally reside in the UK who do not have or are not eligible for an account. The new rules will help to ensure continued access to basic banking services for the most vulnerable.

The new legislation applies to all payment service providers who decide to terminate payment service contracts without a definite expiry date, including bank account closures. They will apply to contracts agreed from and including 28th April 2026, when the legislation is expected to come into force.