The Reform UK leader Nigel Farage has settled his debanking dispute with NatWest Group, nearly two years after the closure of his accounts sparked a chain of events culminating in the resignation of the lender’s chief executive.

Sky News can reveal that Mr Farage and NatWest have agreed to resolve their row, with the bank thought to have agreed to pay him an unspecified sum in damages.

In return, Mr Farage is understood to have withdrawn the threat of potential civil and criminal proceedings against NatWest over the issue.

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Nick Candy, the Reform treasurer, is said to have played a key role in resolving the dispute between the two sides during mediation talks held at a London law firm on Tuesday.

Precise details of the settlement were unclear on Wednesday evening.

Responding to an enquiry from Sky News, Mr Farage and NatWest said in a joint statement: “NatWest Group and Nigel Farage MP are pleased to confirm that they have resolved and settled their dispute, and the bank has apologised to Mr Farage.

“The terms of settlement are confidential.”

Mr Farage was originally expected to seek millions of pounds from the company, alleging that the debanking row had damaged his reputation.

The furore which claimed the scalp of Dame Alison Rose, NatWest’s former chief executive, in the summer of 2023 centred on whether the bank’s Coutts subsidiary had decided to close Mr Farage’s accounts for commercial or political reasons.

NatWest initially claimed the motivation was commercial, before Mr Farage obtained internal evidence from the bank suggesting that his political views had been a pivotal factor in the decision.

A subsequent – and inaccurate – BBC News report further exacerbated the controversy after it emerged that the journalist who wrote the story had sat next to Dame Alison at a charity dinner when the row was at its height.

It sparked a firestorm under the then Conservative government, with Rishi Sunak and Jeremy Hunt, the prime minister and chancellor respectively, indicating to NatWest’s board that they had lost faith in Dame Alison’s ability to lead the bank.

An emergency late-night board meeting led to Sir Howard Davies, who at the time was NatWest’s chairman, concluding that Dame Alison would need to step down – despite her having publicly apologised to Mr Farage for the bank’s treatment of him.

Since then, both have been replaced, with the former Ocado and MasterCard chairman Rick Haythornthwaite replacing Sir Howard, and Paul Thwaite now in his second year as the company’s chief executive.

NatWest has since reported a surge in profitability and is now on the verge of returning to full private sector ownership.

Earlier this week, it disclosed that the government now owns less than 4% of its shares, with the sale of its remaining holding expected by the early summer.

Then known as Royal Bank of Scotland Group and run by Fred Goodwin, RBS was bailed out in 2008 with £45.5bn of taxpayers’ money.

Its journey back to full private ownership has been a meandering one, and taxpayers will ultimately have lost billions of pounds on the government’s rescue deal.

On Wednesday afternoon, shares in NatWest closed at 463.9p, giving the bank a market capitalisation of over £37bn.

The stock has risen by more than 75% during the last year.

The debanking row which claimed Dame Alison’s job prompted the City watchdog to order a change to the treatment by financial institutions of so-called politically exposed persons (PEPs).

Since his initial promise to turn the issue into a mainstream battle against the major UK banks, Mr Farage’s status as one of Britain’s most influential politicians has been cemented.

He led Reform to a handful of seats at last year’s general election, while his party finished in second place in scores of other constituencies.

An opinion poll for Sky News by YouGov earlier this year put Reform ahead of both Labour and the Tories for the first time.