24 Jul 2024

Watchdog uses new powers to protect access to cash

The Financial Conduct Authority says banks must follow new rules when closing branches

Banks and building societies closing branches will have to protect customers’ access to cash under new rules announced by the Financial Conduct Authority (FCA).

Legislation that came into force in June 2023 gave the watchdog new powers to ensure people could conveniently withdraw and deposit cash following the rapid rate of bank and ATM closures.

The regulations will come into effect from 18 September, however they will not prevent the closure of bank branches. Instead, it will require banks to make sure they are plugging significant gaps in local cash access.

Here, Which? explains the new rules from the FCA and what it means for access to cash.

What are the new rules?

The FCA says banks and building societies will need to weigh up if local communities lack access to cash services, like branches and ATMs, and plug significant gaps.

Specifically, they will be required to assess cash access and check whether additional services are needed when changes are made to local services, such as the closure of a local branch.

The new rules also state that local residents and community groups will be able to request an assessment of whether there are gaps in local cash access, which providers must respond to.

Where significant gaps are found, providers will have to deliver reasonable additional cash services.

In such cases, banks and building societies will be required to keep facilities such as branches and ATMs open until alternative cash services become available.

14 banks and building societies will have to deliver this new cash access system – the list can be found here.

The FCA has made changes to the proposals it first consulted on in December 2023, including extending the period for banks and building societies to carry out cash access assessments, giving local communities more time to make their case. Firms will also be able to review the provision of identified cash services after two years.

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How gaps in cash access could be filled

According to the FCA, gaps could be filled with a range of measures, including banking hubs, ATMs and Post Office facilities.

Banking hubs allow staff from several banks to share the same space, helping to fill gaps left in the system from branch closures.

They have a counter service operated by the Post Office, allowing customers to conduct routine banking transactions like withdrawing and depositing cash and paying in cheques.

Prior to winning the General Election, Labour pledged to open 350 banking hubs in towns and villages across Britain over the next five years.

Find out more: New banking hubs announced to help cash access – are they enough?

Why does access to cash need protecting?

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: 'Three million people continue to rely on cash, even as digital payments become more popular. And many small businesses still need somewhere to safely deposit their takings each day.

'That’s why we’ve acted quickly in response to new powers given to us by Parliament to ensure reasonable access to cash withdrawal and deposits is maintained.'

Research published by the watchdog also found that individuals in low-income households (less than £15,000 a year), and who have low digital capability, have a higher reliance on physical cash.

Which? analysis has found bank and building society branches have been disappearing from our high streets at a frightening pace, over the past few years. Since January 2015, banks and building societies have closed 6,058 branches, which represents about 61% of the branches that were open at the start of 2015.

NatWest Group, which comprises NatWest, Royal Bank of Scotland and Ulster Bank, has closed 1,370 branches – the most of any banking group. Lloyds Banking Group, made up of Lloyds Bank, Halifax and Bank of Scotland, has shut down 1,180 sites. Barclays is the individual bank that has reduced its network the most, with 1,221 branches now closed.

So far there have been 410 closures scheduled across 2024, and another 61 have been pencilled in for 2025.

Find out more: is your local bank closing?

'The FCA must take action if banks fall short on protecting cash access'

Rocio Concha, Which? Director of Policy and Advocacy, said: 'Which? led the campaign for these new rules, backed by legislation, which put much stronger requirements on banks and building societies to protect access to cash. The guidance that went before was insufficient amid a wave of ATM and bank closures that left more than 30 parliamentary constituencies – covering nearly three million people – without a single branch.

'It's encouraging that the FCA is moving forward with this plan. It must now be prepared to closely monitor how banks and building societies are behaving and step in with enforcement action if they are falling short of what is needed to maintain cash access in communities.

'Industry initiatives such as banking hubs will likely be the future of banking in lieu of shuttered branches, but their rollout remains too slow for consumers to feel their benefit. The government must deliver its commitment to open at least 350 new hubs in the coming years – and revise that total upwards if necessary.'