Coutts: the king’s bank at the centre of a free-speech storm

For more than three centuries, Coutts has discreetly handled the finances of the UK’s wealthiest people, from royalty to rappers.

However, the private banking arm of government-backed lender NatWest now finds itself uncomfortably thrust into the spotlight after deciding to cut ties with one of the country’s most divisive and combative figures, Nigel Farage, former leader of the UK Independence party and Brexit party. According to an internal Coutts memo he obtained and published this week, this was in part because of Farage’s political views that were “at odds with our position as an inclusive organisation”.

For a wealth manager that counts competence and confidentiality as its key selling points to the super-rich, weeks of hostile media coverage and outrage from politicians could hardly be worse for its reputation.

The backlash has included Prime Minister Rishi Sunak, who criticised the bank on Twitter for undermining free speech, getting a “hear hear” reply from the platform’s libertarian owner, Elon Musk.

The furore has engulfed NatWest’s leadership from Coutts boss Peter Flavel to NatWest chief executive Dame Alison Rose and chair Sir Howard Davies, who face calls from MPs to appear at a parliamentary inquiry. Rose was forced to issue a grovelling apology to Farage and promise a full review of the decision.

Farage’s campaign has also sparked a wider debate over the powers banks and payment companies have to cut off hundreds of thousands of people per year from the mainstream financial system with little or no transparency, in particular politically exposed persons, or PEPs such as MPs.

So too has it raised questions about a company’s right to jettison clients when their personal views conflict with corporate “purpose”, particularly around diversity and inclusion.

“To me this is a very simple case of over-reach and it’s very damaging to them — they’re trying to make a decision on some sort of broader social agenda without any notification to customers,” said Rupert Younger, founder of the Oxford University Centre for Corporate Reputation. “You can quite reasonably apply values and commitments to the people who work with you — it’s wholly inappropriate to apply them to your customers.”

The affair has already prompted the government to rush out new requirements for banks, forcing them to give a longer notice period and explain the reasons for closing an account. NatWest could face regulatory scrutiny over whether it broke anti-discrimination laws.

Coutts is an elite lender that traces its history back to 1692 when it was founded as a goldsmith-cum-bank on London’s Strand by Scotsman John Campbell, quickly earning royal patronage from Queen Anne.

It grew alongside the British empire and eventually became part of NatWest in 1969, which in turn was bought by Royal Bank of Scotland in 2000, before rebranding back to NatWest because of the toxic legacy of RBS’s 2008 taxpayer bailout. The government remains the group’s biggest shareholder.

Inside its headquarters, white-gloved waiters glide around wood-panelled dining rooms to provide silver service to aristocrats, billionaires and their families.

The bank has become synonymous in British culture with exclusivity. It notably requires potential clients to have at least £3mn in savings, or £1mn in investments or borrowings with the bank.

But Coutts is most famous for being the royal family’s bank. One former NatWest director said that the late Queen Elizabeth insisted that her family held their accounts exclusively at Coutts, giving her complete purview over the House of Windsor’s finances.

Coutts has a chequered history of controversial clients. In 2005, a US Senate subcommittee found that its US arm, long since sold, was among lenders that helped Chilean dictator Augusto Pinochet and his family hide $15mn.

In 2020, a banker in its Swiss unit was fined for ignoring warning signs and allowing Malaysian financier Jho Low to transfer $700mn into his accounts without notifying regulators. Low siphoned off as much as $4.5bn from Malaysia’s sovereign wealth fund 1MDB and remains an international fugitive.

While the business was sold in 2016, Coutts still faces litigation in Malaysia over its failure to conduct proper due diligence on Low.

Its latest scandal has attracted the most unwanted noise.

A dossier prepared for Coutts’s wealth reputational risk committee and obtained by Farage reveals harsh criticism of his worldview. “Continuing to bank NF was [not] compatible with Coutts given his publicly-stated views that were at odds with our position as an inclusive organisation,” one memo read.

Another said Farage deliberately uses “extreme, hateful and emotive language . . . at best he is seen as xenophobic and pandering to racists”.

Coutts has publicly maintained that it would not remove customers because of their political views and that “decisions to close an account are not taken lightly and involve a number of factors including commercial viability, reputational considerations, and legal and regulatory requirements”.

Several people briefed on the process told the Financial Times that the trigger for discussing whether to continue to keep Farage as a client was an early mortgage repayment that caused him to fall below the £1mn borrowing threshold; a point also mentioned in the dossier.

However, one of the people conceded that if Farage were a billionaire, it is unlikely his views would have been enough to get him defenestrated.

As part of their attempts to modernise under Rose, Coutts and its parent NatWest have leaned heavily into sustainability, diversity, equality and inclusion, establishing them as core values for the business. In 2019 Coutts became a “B Corp”, committing it to enhanced environmental, social and governance goals.

While Farage acknowledges his account fell below Coutts’s requirements, he said it has subsequently recovered and therefore alleges the decision was purely political.

“That dossier is full of bile and prejudice. This is a huge issue, it is much bigger than one politician and Coutts,” Farage told the FT. “If you did a survey of the 19mn NatWest customers you’d find a broad spread of views. Are you saying every Brexiter, every conservative who doesn’t agree with the bank’s policy on diversity and inclusion shouldn’t be able to bank with them?”

Once Coutts had agreed to “a glide path to exiting NF” in late 2022, it made sure to inform the reputational risk committee of its parent NatWest “to ensure they did not have any concerns with this”.

The report flagged that “a decision to exit may result in NF using his platform on GB News/social media to air his grievances (unless he was too proud or embarrassed to publicise it)”. However, it concluded the “risk of negative publicity in exiting . . . was accepted”; a judgment that one NatWest insider conceded had not aged well.

The scandal now threatens the position of CEO Rose and comes at an awkward time for one of the country’s highest-profile female executives. Just days before Farage released his dossier, it was announced she was one of two bankers selected to be on Sunak’s 14-strong business council. She was also made a dame in the New Year’s honours list for services to finance.

“This obviously dents her credibility,” said Samuel Johar, chair of board advisory group Buchanan Harvey. “Once the situation with Farage became public, the bank should have fixed the issue rather than been disingenuous about it.”

Rivals also point to the own-goal the affair has been. While many of Coutts’s customers are famous — from King Charles to rapper Stormzy — the former Ukip leader was rarely mentioned among its clientele.

“What reputation risk was Coutts running?” said an executive at another financial services company. “Who the hell knew or cared that they banked Farage? That’s the real ironic flaw in the decision to exit him. They addressed a low-to-no reputation risk issue and made it into a whopper!”

Additional reporting by Emma Dunkley and Siddharth Venkataramakrishnan in London