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UK lenders will be required to formally appraise gaps in local banking services and ensure they do not close branches until these are plugged under new proposals announced by the financial watchdog.
The Financial Conduct Authority on Thursday said it would consult on the planned reforms, which come after the government in August granted the regulator new powers to protect customers’ and businesses’ access to cash.
The FCA’s new powers do not allow the watchdog to impede the closure of bank branches. But the draft rules would necessitate banks and building societies to conduct assessments to acknowledge access blackspots and deliver “reasonable additional cash services” in response.
The reforms would also necessitate lenders to assure they would not close cash points until additional services were made available in those areas.
The proposals come amid growing pressure from consumer groups and politicians to fight against so-called “cash deserts” with almost three-fifths of branches set to shut this year since 2015, according to analysis by the Financial Times.
Sheldon Mills, FCA director of consumers and competition, said the proposals would “help handle the pace of change [towards online systems]” and ensure that people could continue to access physical money if they need it.
“We know that, while there is an increasing shift to digital payments, over 3mn consumers still rely on cash — particularly people who may be vulnerable — as well as many small businesses,” he said. “It’s important that we uphold consumers impacted by recent innovations.”
British consumers and businesses can access face-to-face banking services in the 24 “banking hubs” that are run jointly by more than a dozen different banks, Cash Access UK and the Post Office.
However, campaign groups and regulators have criticised the slow rollout of the hub network against a backdrop of rising cash usage last year.
The Labour party last month pledged to accelerate the delivery of banking hubs and bolster financial regulators’ powers to protect cash access if it won the next general election.
In August, ministers set out to enshrine in law most people’s right to have cash access within a reasonable distance of their homes and businesses.
At the start of the year, 95 per cent of the UK population lived within one mile of a free cash withdrawal point while 99.7 per cent of the population were within three miles, according to the FCA.
The FCA said the draft rules would be open to consultation until February and that it expected to finalise them by the third quarter of next year.
