The Financial Conduct Authority (FCA) has set out potential regulatory breaches and a number of areas for improvement for NatWest Group and Coutts following the completion of phase one of its review into the incident earlier this year with Nigel Farage.

Coutts is a private bank and wealth manager, which is owned by NatWest, which holds accounts for a number of prominent people including celebrities and politicians. Earlier this year, Brexiteer, Nigel Farage, said that the bank had planned to shut down his account and he had not been given a reason.

He obtained a report from Coutts that suggested that his political views were considered when the decision to close the account was made.

This led to NatWest’s chief executive, Dame Alison Rose, resigning from the role after admitting she had made a mistake in speaking about Farage’s relationship with the bank.

It also led to a public debate over people having their accounts closed because of their views.

As part of the report, the FCA has said that the firm’s processes, systems and controls around how they consider potential closure of accounts and complaints from customers should be improved.

Furthermore, the regulator has said that both banks must improve the allocation of responsibilities and effectiveness of their governance mechanisms.

The FCA has confirmed that it is now reviewing the governance, systems and controls at both Coutts and NatWest that are working to identify and address any significant shortcomings.

Equity analyst at Hargreaves Lansdown, Matt Britzman, said: “NatWest has been in a pickle of late following a series of governance issues.

“The independent review found no legal breach, but did pick up on several governance concerns with how the decision was reached – something I think we already knew.”

The statement comes as NatWest reports a “very weak update” in the latest quarter, as described by analysts at Barclays, with predictions now forecasting a double-digit downgrade on profit expectations and potential reductions in the amount the bank will pay out to shareholders.

Britzman added: “Back to results, they were largely disappointing as net interest margin dipped below 3%, and the outlook was lowered. Deposit levels did grow, which is a positive sign that NatWest is pricing itself at the right levels to attract customers searching for higher rates.

“That trend’s plain to see, with longer-term cash balances jumping to 15% of the book – compared to 11% last quarter. But it’s less profitable business than non/low-interest current accounts. Add in mortgage headwinds as highly profitable business written over the pandemic rolls off, and that’s caused the hit to net interest margin.

“As we’ve seen across the sector this week, the consumer remains resilient. Charges taken in anticipation of loan losses were a little lower than expected. Higher borrowing costs are being offset by proactive finance management, wage growth and a strong labour market.”

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