Lloyds Banking Group has begun contacting thousands of customers throughout Europe to warn of the impending closure of UK accounts at the end of this year. The result of this could be thousands of British expats in Portugal losing access to the daily banking services they rely on.
Lloyds, which also includes Halifax and the Bank of Scotland, is just the latest major British bank to take this route, following similar moves by Barclays and Coutts, whose customers have also received letters warning of closures.
Why would a bank close customer accounts? It is, in essence, a matter of how much their customers in Portugal are worth. Speaking to Atlas, the British Embassy in Lisbon says: “The decision to offer standard UK bank accounts to non-UK residents is a commercial decision and will continue to be so after the end of the UK transition period.” And commercially speaking, continuing to offer accounts isn’t all that attractive for these banking groups.
A bank with license to operate in one European Economic Area state — which includes EU countries and also Iceland, Liechtenstein and Norway — can trade in any other EEA state without applying for an additional license under what are known as “passporting arrangements.” However, when the Brexit withdrawal agreement ends on December 31, UK banks lose the right to these passporting arrangements, and thus would have to apply for additional licenses in any state where they wish to trade, including Portugal. Without a new framework being agreed upon before Brexit, this process would prove extremely costly for the banks. Too costly, it would seem, to be worthwhile.
The water is further muddied by the fact that not all banks are following suit, with the BBC reporting that HSBC and Santander have no intention of closing expat accounts — t least for now, since there is still the possibility of a passport agreement, with the UK having already passed legislation to allow it but the EU has yet to do the same.
Speaking to Atlas, the Royal British Club in Portugal, a cultural and business association for British expats, says that “many people are obviously expressing concern about their pensions” which is no surprise considering an estimated 50,000 British pensioners currently reside in the country.
However, these cancellations will only affect those people whose registered address is here in Portugal as opposed to those with a second home, since all you need to keep a UK account is a UK address.
Bank Account Closures are a Two-Way Street
This is also happening in the other direction, with some EU banks opting not to get a UK banking license. Notably the German-based N26, a so-called “challenger bank,” closed all its UK accounts in April of this year, affecting around 200,000 customers. This, however, represents a negligible number of customers for a bank, with many of the larger players likely to still trade in the UK as it remains a financial hub.
If you’re concerned that you will be affected by account closures, the British Embassy in Portugal told us that they “have advised that [UK citizens in Portugal] should be contacted directly by their provider if they are affected; while recommending that they should contact their bank or an independent financial adviser if they have any questions.”
For more advice about how Brexit could affect you (and what to do about it) see here: https://www.fca.org.uk/consumers/how-brexit-could-affect-you.