HSBC has reportedly asked over 40 diplomatic missions, including the Vatican's ambassadorial office in the UK, to close their accounts.
The scheme is being run to reduce the business risks taken on by the UK-based firm and the diplomats now have 60 days to move their accounts, the Mail on Sunday reports.
In order to help the entities open another bank account, the Foreign Office has stepped in and has been in contact with HSBC about the matter.
The institution said the embassies were subject to the same assessments as all other businesses and did not meet five key criterias: international connectivity, economic development, profitability, cost efficiency and liquidity.
A spokesman told the newspaper: "HSBC has been applying a rolling programme of "five filter" assessments to all its businesses since May 2011 and our services for embassies are no exception."
HSBC was fined $1.92 billion by US authorities in 2012 after it was linked to alleged money laundering activities.
By Tony Aynsley