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UK banks pulling out of pawn shops to cut risk: lawmaker
[LONDON] Banks in Britain may be denying credit to consumers by cutting off services to pawnbrokers to avoid falling foul of anti-money laundering rules, a senior UK lawmaker said on Friday.
Andrew Tyrie, chairman of parliament's Treasury Select Committee has told the Financial Conduct Authority (FCA) that a growing number of individuals, firms and charities are being denied access to banking.
"Banks are reducing their exposure to risk - financial and reputational - in response to anti-money laundering rules. Some of this de-risking is damaging small businesses and making life difficult for thousands of individuals," Mr Tyrie said in a statement on Friday.
Mr Tyrie and other lawmakers want to see more competition in financial services.
The National Pawnbrokers Association told Mr Tyrie last year that denial of banking will reduce credit for consumers and cut competition in short term loans.
Tracey McDermott, acting chief executive of the FCA said only a small proportion of the pawnbroking industry has been cut off from current accounts.
"As present we have not seen evidence that leads us to conclude these closures are sufficiently widespread to compromise the public's access to credit from the pawnbroking industry," she said in a letter to Tyrie made public on Friday.
It was the money transfer and cheque cashing activities of the pawnbrokers in question, rather than their traditional activities, that led banks to pull out, Ms McDermott said.
The FCA has commissioned an external consultant to look into denial of banking services more broadly.