Although banks are not required to give a reason why they are closing your account, in general such an action would be unusual, unless there has already been some correspondence or discussion regarding a specific issue. Banks would be taking such action only as a last resort.

 

The most natural causes of such actions are:

  • A low level of activity, resulting in minimal fees and charges that make operating of the account unprofitable for the bank;
  • A change in the banking environment. Brexit is a typical example, where thousands of accounts in both the UK and Europe have been affected by this development and accounts are being closed;
  • A change in legislation that forces the bank to stop trading with certain types or nationalities of customers.

 

In more extreme cases, the bank may make such a decision for reasons relating to the legal or business status of the customer, such as:

  • A gross breach of the provisions of the account agreement or regulations;
  • Use of the bank account contrary to generally applicable laws;
  • No funds were paid into a new account for an extended period after opening and a zero account balance is maintained;
  • No activity for more than three months other than bank’s own charges and interest and the account balance does not cover further fees;
  • Failure to meet repayments of loans on the date agreed;
  • The bank has discovered you provided untrue information when opening the account.
  • A petition has been filed for your bankruptcy or liquidation or the bank judges that your solvency is at risk;
  • If your name has been published on some official list warning against dealing with you in any financial or business role;

 

Is it bad if a bank closes your account?

All business you conduct with a bank is subject to the prevailing privacy laws, and so as a rule the decision to close your account is strictly private. However, it may be a legal requirement when opening another account to disclose the historical details of closed accounts at different banks, which can influence the new bank’s decisions. On the whole, as long as the bank’s decision to close the account was made for business reasons, based on the profitability of your account, there should be no impact on your future banking.

Why would a bank close your account without explanation.

A bank is not required by law to tell you why they closed your account, and may refuse to give you a reason. Basically, the failure to provide a reason may relate back to the cause of this action, where the bank feels that it can gain no possible benefit in further engagement.

Can a bank close your account for inactivity.

Although a bank has total discretion and can close an account for any reason, the most likely cause for such an action in cases of inactivity will relate to accounts where the likely future charges exceed the current balance and there has been no pattern of activity to indicate that deposits will be made sufficient to meet these future charges. As well, new accounts that have never received incoming funds could be closed within a very short timeframe so that a negative balance from fees and charges is never accumulated.

Why would a bank close your account.

Your relationship with the bank is that of customer and supplier, and as the supplier, the bank has expectation of earning a profit from the transactions you undertake. The most likely cause of any decision to close an account would be that the bank has judged that there is no potential for earning sufficient profit to offset the inherent cost of your account. This may have nothing to do with your own creditworthiness or good standing, but be simply a reflection of how expensive the bank finds it to maintain the necessary infrastructure, balanced against your level of revenue generation for the bank.

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