Defence SMEs face banking delays rather than widespread exclusion
Banking access for UK defence SMEs is hampered by friction and delays rather than widespread exclusion, the Financial Conduct Authority (FCA) said in an October 26, 2026 blog. Its work introduces no new rules or requirements.
Onboarding creates the friction
The FCA found that the financial services firms it engaged with can and do serve defence SMEs.
Some are investing in specialist expertise, dedicated teams and governance processes to support the sector.
However, the regulator also heard about lengthy onboarding, repeated information requests and delayed decisions.
It said no regulatory barrier prevents firms from supporting lawful defence businesses.
Firms retain commercial discretion and set their own risk appetite, but their processes need to be proportionate to individual customer risks.
SMEs can help by explaining their risk controls and supplying clear, timely information.
Banking access supports contracts, investment, innovation and UK national resilience.
Different businesses need different checks
The FCA said defence spans software, logistics, maintenance, engineering, manufacturing and consulting, with differing business models and risk profiles.
Robust financial crime due diligence remains essential, but risk assessments need to reflect each customer's activities.
Many firms lack a clear picture of their defence customers and their experiences.
Better management information can reveal application delays, inconsistent decisions and whether governance reflects actual risk and outcomes match firms' stated approaches.
Process change, not new rules
The FCA places the emphasis on how banks assess and onboard defence SMEs, not on blanket access guarantees.
Its work asks firms to distinguish customer risks while retaining financial crime controls.
Better data gives firms a way to test whether their stated approach matches customer outcomes.
Source: Defence SMEs need banking services that work
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