HSBC is shutting down the bank accounts of Finsbury Park Mosque in north London and also those of some other Muslim organisations in the UK.
The bank wrote to Finsbury Park Mosque on July 22 stating that it could not continue to provide it with banking services because it now "falls outside of our risk appetite". The mosque has in the past been linked with radicalism. The London imam Abu Hamza, who used to run Finsbury Park and has preached there, was convicted on 11 counts of terrorism in New York earlier this year and will be sentenced in September.
The mosque says it has reformed and believes it is the victim of a campaign against Muslim charities in Britain.
HSBC said in a statement: "We do not discuss relationships we may or may not have with a customer, nor confirm whether an individual or business is, or has been a customer.
"Discrimination against customers on grounds of race or religion is immoral, unacceptable and illegal, and HSBC has comprehensive rules and policies in place to ensure race or religion are never factors in banking decisions."
The bank is strategically assessing its businesses after it paid £1.1 billion to US authorities in 2012 over allegations concerning money laundering.
"As a result of these ongoing reviews, we have exited relationships with business and personal customers in over 70 countries. The services we provide to charities are no exception to this global review," the bank said in its statement.
The mosque's chairman Mohammed Kozbar told the BBC: "The bank didn't even contact us beforehand. Didn't give us a chance even to address [their] concerns.
"For us it is astonishing - we are a charity operating in the UK, all our operations are here in the UK and we don't transfer any money out of the UK. All our operations are funded from funds within the UK."
He added: "The positive work we have done since taking over over from Abu Hamza to change the image of the mosque, there is nothing really that can explain [HSBC's decision]."
Jeremy Corbyn, MP for Islington North, defended the mosque.
"Over the past 10 years, it has developed into a superb example of a community mosque supporting local people and providing facilities for all faiths if they need it. I am shocked and appalled at the decision of HSBC."