A new report found significant barriers facing voluntary organisations. 

Charities continue to face challenges engaging with banks as the financial institutions struggle to understand voluntary sector structures, a new report has warned. 

The joint research produced by Charity Finance Group (CFG) and the Civil Society Group warns retail banking services leave charities frustrated and worried about their finances. 

The report – Charity Banking Challenges 2024 – reveals that nearly all respondents (92%) have experienced at least one difficulty related to banking in the past two years.

The report points to a variety of problems that charitable organisations face, despite ongoing efforts by the banking and charity sectors to improve banking services. 

The results indicate a systemic issue that requires urgent attention, warned CFG.

A total of 1,899 representatives – mainly trustees and volunteers from small to medium-sized charities – took part in a survey launched by the Civil Society Group in March 2024, with 270 respondents from Scotland. 

A series of recommendations have been included for banks, charities and regulators to help improve the current situation facing voluntary organisations in Scotland and across the UK. 

Kirsten Hogg, SCVO head of policy and research, said: “The findings in this report provide evidence of what we've been hearing from voluntary organisations for some time about the difficulties they face in accessing banking.  

“While these challenges come in a variety of different forms, the overarching theme of banks not understanding voluntary sector structures, and charities finding it hard to engage with banking structures set up for different types of organisations is common.  

“Conversations with the banks on how best to address this are in the early stages, but meantime voluntary organisations continue to face these frustrating issues, and this report is very welcome in helping us to shine a light on those."

Foundation Scotland is a nationwide funder, supporting projects of all sizes across the length and breadth of the country. 

Their role requires them to ensure that the charities and voluntary groups they fund have robust financial governance in place to manage their vital funding income effectively. 

Helen Wray, head of philanthropy at Foundation Scotland, told TFN: “A key element of our due diligence process is ensuring that these groups meet our minimum eligibility criteria, which includes holding a bank account in the name of the group or charity. However, despite meeting these criteria, many charities and groups face significant barriers in accessing and managing funds due to challenges with their banks. 

“These challenges can include difficulties in amending signatories or being frozen out of accounts, which can have devastating knock-on effects. For some groups, these issues delay or entirely disrupt their ability to deliver crucial services, leaving individuals and communities without the help they need. This is not merely an inconvenience. It can cause severe hardship for those relying on these services.

“We strongly support the recommendations in the Charity Finance Group (CFG) report. In particular, we advocate for financial institutions to collaborate with the charity sector and its stakeholders to develop a shared understanding and improve communication between banks and charities. 

“By working together, we can create solutions that enable, rather than hinder, the vital work of charities and community groups, which form the backbone of many communities across Scotland.”

The main findings of the report include nine in ten (92%) of respondents experiencing one or more issues related to banking, while over three quarters (77%) found changing signatories on bank account mandates difficult.

A further four in ten (40%) had been asked to complete checks that were not designed for charities or voluntary organisations, while nearly a third (32%) had found it difficult to open accounts with a new bank.

Finally, over a quarter (29%) stated that a requirement to provide personal information for all trustees, not just signatories, was problematic.

Alongside the difficulty of administration, respondents said that communicating with their bank was a challenge and, at times, had been a source of stress. This was exacerbated by a lack of access to bank branches, both physically and digitally. 

Saskia Konynenburg, executive director at NCVO, said: “Today’s findings clearly demonstrate that the banking sector still isn’t meeting the essential needs of charities and voluntary organisations. The sheer level of charity staff and volunteers experiencing significant banking challenges, shows these issues are systemic and require immediate action.

"Banking is a key need for charities, but retail banking services are not set up with charities in mind. Therefore, things that should be simple like changing a signatory become onerous tasks, draining time and finite resources at best, and at worst leaving them with closed accounts and no access to funds.

"We urge banks to expedite this work to implement meaningful changes that will ensure charities can manage their finances effectively and focus on supporting the communities they’re set up to help.”

Detailed recommendations put forward in the report include the creation of dedicated customer service teams to support queries about charity and community accounts in banks, and the adaptation of forms and information on charity and community accounts to reflect the language those organisations use. 

The authors urged charities to take positive steps to engage with banks and educate members on banking systems, alongside ensuring they know how to complain to their bank or financial institution, and how to progress unresolved complaints. 

The report also called for guidance to be produced by regulators across the UK, urging groups to work together to combat challenges - including fraud. 

Clare Mills, deputy CEO of Charity Finance Group (CFG) and the report’s co-author, said: “This latest report on charity banking challenges backs up the findings of the research we conducted in 2022 which kick-started our work with the banking sector. Both reports show widespread frustration with retail banking services across the UK charity sector.

“All too often, banks do not understand the governance structure of charities and therefore don’t ask the right questions. At times, they do not explain clearly enough what is required and why. There is a clear disconnect between the service that retail banks think they provide to their charity account holders, and the level of service they receive.

“The majority of those managing banking for charitable organisations are giving their time, skills and energy for free. Unfortunately, too many are wasting time and resources trying to resolve common banking issues. This means that the charity’s beneficiaries – the people and communities they serve – miss out.

“Banking challenges not only drain precious resources from charities, but can expose them to risks, such as fraud or having their account closed without warning or explanation.

“There’s an urgent need for the Civil Society Group, UK Finance, the FCA and banking representatives to continue to work together to find real solutions to these very common but frustrating challenges.”