Government announces FCA will receive new powers over cash access

The announcement was made by the Government on 19 May 2022, according to the Financial Conduct Authority. The FCA said the new powers are intended "to ensure the continued availability of withdrawal and deposit facilities in local communities across the UK"¹. The Government had consulted in July 2021 on legislating to protect access to cash in the long term¹.

The FCA set out its own expectations for firms closing branches or cash machines in updated guidance on branch and ATM closures, published in October 2022. That guidance was originally published on 14 September 2020 and took effect on 21 September 2020; it was updated with effect from 11 October 2022 and continues to have effect until varied or revoked². The FCA said the guidance is not intended to overlap with, or pre-empt, decisions about the new powers, and that it will review the guidance if appropriate in respect of those powers².

The updated guidance extends the FCA's expectations to "partial closures", defined as a long-term reduction in branch opening hours or days, or a reduction in branch services such as the removal of a counter, where this would have a significant impact on customers¹. The FCA decided the guidance should apply to long-term closures lasting six months or more². It applies when firms decide to partially or fully close a site, but not in the event of unplanned closures, pilot programmes or temporary closures². The FCA said it has not set a specific threshold beyond which impacts are significant².

The FCA's figures on who uses branches and cash come from its Financial Lives Survey. Around a fifth (21%) of adults with a day-to-day account regularly used a particular branch over the previous 12 months, including the digitally excluded (42%), those in poor health (27%) and those in financial difficulty (27%)². It also found 6% of UK adults used cash to pay for everything or most things over the previous 12 months, rising to 9% for adults with one or more characteristics of vulnerability, and to 26% among the digitally excluded². An earlier consultation document, published in June 2022, cited different figures from the 2020 survey: around a quarter (27%) of adults with a day-to-day account regularly used a branch, with the digitally excluded at 52%, those aged 75 and over at 45%, those in poor health at 37% and the self-employed at 37%¹.

The guidance covers services including cash withdrawals and deposits, cheque deposits, in-branch payments, opening or closing an account, proving identity, Power of Attorney and bereavement issues, fraud and scams, and support for customers in financial difficulty². Firms are expected to communicate a closure or conversion to customers and other stakeholders no less than 12 weeks before it is implemented, and to publish a high-level summary of their analysis and a list of the stakeholders they are contacting². The FCA said it does not expect firms to formally consult customers or staff as part of the pre-announcement analysis, although some may choose to².

Why it matters for households

The announcement concerns who oversees cash access, and the FCA's guidance sets out what banks, building societies and credit unions are expected to do before closing a branch or cash machine, or reducing opening hours or services. It applies to firms subject to Principles 6, 7 and 11 of the FCA's Principles for Businesses, and the FCA's Consumer Duty came into force on 31 July 2023². The FCA said it will take proportionality into account when considering how a credit union has followed the guidance².

The practical effect for households is that a planned closure or reduction in service should be assessed for its impact on customers, including those in vulnerable circumstances, and communicated at least 12 weeks ahead, with alternatives identified. The FCA said it may ask firms to delay closure or conversion plans where it is not satisfied they are complying with Principles 6 or 7, and that the guidance is potentially relevant to supervisory and enforcement action². The FCA's own figures indicate that reliance on branches and cash is higher among the digitally excluded, those in poor health and those in financial difficulty².

What happens next

The FCA said the Government announced on 19 May 2022 that it will receive new powers, and that the FCA will review its guidance and revise it if appropriate in respect of those new powers or further developments in retail banking². The detail of the new powers, including when they take effect, has not been reported in these documents.