FCA consults on updated guidance for firms on branch and ATM closures or conversions (GC22/2)

The Financial Conduct Authority (FCA) published a guidance consultation, GC22/2, in June 2022 proposing to update its guidance for firms on branch and ATM closures or conversions¹. The original guidance, FG20/3, was published on 14 September 2020 and took effect on 21 September 2020¹. The consultation sets out changes to the access to cash rules that firms are expected to follow when considering bank branch closures and ATM conversions.

The FCA said the proposed updates expand the scope of FG20/3 to apply to partial closures, where there would be a reduction in opening hours or services with a significant impact on customers¹. It proposes to define a partial closure 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 definition would also cover a reduction in hours of internal extended hours ATMs, and would use "long-term" rather than "permanent" to capture closures lasting six months or longer¹.

The consultation also covers emerging delivery models, closure analyses and wider stakeholder communications¹. On emerging models, the FCA said it is not proposing to extend the definition of a branch, which already covers physical sites where firms provide regulated banking activities or payment services, but will remind firms that the guidance applies to a proposed closure of, or withdrawal from, a banking hub or other venue¹. On closure analyses, it expects analysis to include usage trends and overall transaction volumes across a suitably representative time period, and wants firms to share details of any commercial evaluation with the FCA¹. On communications, the FCA already expects firms to tell customers about proposed closures or conversions no less than 12 weeks before implementation, and wants to extend this so that relevant consumer groups and local councils are proactively contacted, with firms publishing a list of stakeholders they are contacting¹.

The FCA's Financial Lives Survey 2020 found that around a quarter (27%) of adults with a day-to-day account regularly used a branch, and one in six had a branch they previously used regularly close in the last 12 months¹. The consultation states that adults most likely to regularly use a branch include the digitally excluded (52%), those aged 75+ (45%), those in poor health (37%) and the self-employed (37%)¹. It adds that 10% of UK adults say they rely on cash to a "great" or "very great" extent, rising to 16% for adults with one or more characteristics of vulnerability¹.

The FCA said the cost benefit analysis only covers the update to the guidance, and that there is no statutory requirement in the Financial Services and Markets Act 2000 for a cost benefit analysis on guidance such as this¹. It said any costs and benefits will be highly dependent on the scale of any future plans for site closures or conversions by firms, and the specific actions firms take, and so are not reasonably practicable to estimate¹. The FCA also said firms should continue to follow other applicable requirements, including the 2010 Equality Act, consumer protection and competition law, and its Handbook provisions, and that in Northern Ireland, where the Equality Act is not enacted but other anti-discrimination legislation applies, firms should comply with any applicable legislation¹.

Why it matters for households

The consultation concerns how banks and building societies assess the effect of closing or converting branches and ATMs on their customers, and what they must do before going ahead. If adopted, the guidance would apply to partial closures as well as full closures, meaning reductions in opening hours, days or services such as counters would be assessed in the same way¹. It would also apply to long-term changes lasting six months or longer, and to the withdrawal of services from banking hubs or other community sites¹. The FCA's existing expectation that customers receive at least 12 weeks' notice of a closure or conversion would remain, with the addition that consumer groups and local councils are proactively contacted and a list of stakeholders published¹. The consultation notes that some groups are more likely to use branches regularly, including the digitally excluded, people aged 75 and over, those in poor health and the self-employed¹. The FCA said it does not consider the proposals will adversely affect consumers with protected characteristics, and that consumers with some protected characteristics, such as those with a disability, may benefit¹.

What happens next

The consultation is open for responses. The FCA said it has updated its examples of good practice and areas for improvement alongside the consultation¹. The document notes that on 19 May 2022 the Government announced the FCA will receive new powers to ensure the continued availability of withdrawal and deposit facilities in local communities across the UK, and that in July 2021 the Government consulted on legislating to protect access to cash in the long term¹. The FCA's review also took into account the Lending Standards Board's review of the Access to Banking Standard, including its recommendation that the FCA should in future provide sole oversight of branch closures and changes in branch service provision¹.