The UK’s legislative and regulatory framework can cause friction for charities when accessing and using banking services, a new finance-sector report has said.
This week, UK Finance, a membership organisation representing the banking and financial services industry in the UK, published its first Charity Banking 2026 report.
The report takes stock of the banking landscape for charities and voluntary organisations, highlighting products and services offered by the industry.
It acknowledges “where legislation and regulation can sometimes cause friction for charities opening accounts”, and explains why these checks are needed.
It also sets out changes banks have made and are making to improve services and experiences for charities and their staff and volunteers.
Charities have long reported difficulties around banking, with a group of MPs calling on the government earlier this year to “work urgently” with the Financial Conduct Authority and UK banks to improve services for the sector.
In July, a report by the Charity Finance Group (CFG) found UK charities spent 12 million hours annually on banking admin.
Rules can be ‘challenging’ for charities to navigate
The new report says that while lots of products and services are available to charities, “there are occasions when the system doesn’t work equally well for the diverse range of charities within the sector”.
One area of concern relates to the processes required to open and manage bank accounts, with managing mandates standing out as an issue of particular concern.
“Many of these concerns are linked to important elements of the UK’s legislative and regulatory framework which banks need to comply with,” the report says.
“There are some reasons why the requirements imposed by these frameworks can cause extra difficulty for charities in relation to their specific governance structures and activities.”
Banks recognise that things such as know your customer (KYC), anti-money laundering regulations, sanctions legislation and anti-bribery and corruption rules can be challenging for charities to navigate.
That is why they aim to provide “clear guidance and take a balanced approach to help charities complete the necessary processes as smoothly as possible”, the report says.
“To balance compliance requirements and impact on their customers, banks generally apply a risk-based approach to these requirements, aiming to support customers wherever possible while meeting legal and regulatory obligations.
“This means that requirements may differ depending on the organisation’s structure, activities, geography, transaction patterns and services requested.”
Banks ‘moving in the right direction’
Over the past two years, UK Finance’s members including Barclays, CAF Bank and Lloyds, have introduced changes to improve customer journeys and experiences for charities.
These include improving processes, expanding digital tools, ensuring access to services and strengthening specialist support and charity-sector expertise.
The report says feedback from charity customers indicates that changes are having an impact and that “banks are moving in the right direction”.
However, it adds that “more can still be done”. “Banks are already reviewing and improving their products and services, with further changes planned in the coming months and years.
“They’ll continue to draw on customer and stakeholder feedback to deepen their understanding of the challenges and guide further action, particularly on cost, access and processes.”
The report concludes that banks remain “committed to working with customers, industry bodies, regulators and other stakeholders to improve outcomes for charities while meeting the regulatory requirements that protect customers and the financial system”.
“Continued dialogue will help banks respond to evolving needs and support charities to operate effectively,” it says.
‘Greater mutual understanding helps reduce friction’
Clare Mills, co-chief executive of CFG, welcomed the report, saying “we’re pleased to see the banking sector has recognised many of the challenges that charitable organisations have consistently raised over recent years”.
“Our own 2026 report on banking found that while some longstanding challenges are beginning to improve, banking remains a source of administrative burden, stress and cost for many organisations. It’s encouraging to see UK Finance acknowledge the need for continued improvements to processes, and access to services and expertise.
“Over the past three years, CFG has worked closely with a number of banks through tailored training and engagement programmes designed to improve understanding on both sides,” Mills said.
“Charities often operate under governance arrangements that differ significantly from commercial organisations, while banks must meet important regulatory and financial crime requirements. Building greater mutual understanding helps reduce friction and leads to better outcomes for everyone.”
Mills said she was particularly pleased to see a focus on strengthening specialist support and charity-sector expertise, adding that the most effective banking relationships are built on an understanding of how charities are structured, governed and funded.
“There’s still more to do,” she added. “Rising banking charges and declining access to in-person services remain significant concerns for many charities, particularly smaller organisations.
“UK Finance’s report represents a positive contribution to the conversation and an important recognition that charities need banking services that reflect the realities of how the sector operates.”
