FCA consults on updates to branch and ATM closure guidance

The Financial Conduct Authority (FCA) opened a consultation on 14 June 2022 on changes to its guidance on branch and ATM closures and conversions, closing on 26 July 2022¹. The guidance was originally published on 14 September 2020 and took effect on 21 September 2020, and was updated with effect from 11 October 2022¹. The consultation asked whether the definition of closures should be extended to include partial closures caused by a long-term reduction in opening hours or services that would have a significant impact on customers¹.

The FCA said it had decided the guidance should apply to long-term closures lasting six months or more¹. It applies when firms decide to partially or fully close a site, but not in the event of unplanned closures, pilot programmes or temporary closures, where the FCA recognises some expectations would be disproportionate¹. The FCA said it had not changed its guidance to include a specific threshold beyond which impacts are significant¹.

The guidance covers full planned closures of a branch or ATM, partial closures, and the conversion of a free-to-use ATM to pay-to-use¹. It defines a branch widely as the physical site where firms undertake regulated banking activities or provide regulated payment services for customers, whether consumers or small and medium enterprises, who attend in person¹. It applies to firms subject to Principles 6, 7 and 11 of the FCA's Principles for Businesses¹. The FCA's Consumer Duty (Principle 12) comes into force on 31 July 2023¹.

The FCA set out which customers the guidance covers. Where it relates to regulated payment services, a customer means a consumer, a micro-enterprise employing fewer than 10 people with a turnover or annual balance sheet of up to €2m, or a charity with an annual income of less than £1m¹. Otherwise, customer means a consumer or an SME with annual turnover of up to £25m¹. The FCA said it will take proportionality into account when considering how a credit union has followed the guidance¹.

Data from the 2022 Financial Lives Survey cited in the guidance shows around a fifth (21%) of adults with a day-to-day account regularly used a particular branch over the previous 12 months¹. Adults most likely to regularly use a branch include those with one or more characteristics of vulnerability, such as the digitally excluded (42%), those in poor health (27%) and those in financial difficulty (27%)¹. The survey also shows 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, including the digitally excluded (26%), those in poor health (15%) and those in financial difficulty (14%)¹.

The guidance states that branches should not be fully or partially closed until reasonable, fit-for-purpose alternatives are in place¹. It says firms should communicate a closure or conversion clearly to customers and other relevant stakeholders no less than 12 weeks before it would be implemented¹. The FCA amended paragraph 2.37 to clarify that clear communications should include direct written communications to customers who use the closing branch and will be impacted by its closure¹. It also said it does not expect firms to formally consult their customers or staff as part of the analysis conducted before their announcement, although some firms may choose to do this¹.

Why it matters for households

The guidance sets out what the FCA expects of firms when a branch or ATM is closed or converted, and the consultation proposed extending those expectations to long-term reductions in opening hours or services, not just full closures¹. For households that rely on a local branch, the practical effect is that a firm considering such a change is expected to analyse customers' needs and the impact before deciding, and to have alternatives in place before closing¹. Customers who use a closing branch should receive direct written communication, and firms should publish a high-level summary of their analysis¹. The FCA said it expects to challenge processes and may ask firms to delay closure or conversion plans where it is not satisfied they are complying with Principles 6 or 7¹.

What happens next

The guidance was updated with effect from 11 October 2022 and continues to have effect until varied or revoked¹. The FCA said it expects the updated guidance to apply as soon as it is published¹. On 19 May 2022, the government announced that the FCA will receive new powers to ensure the continued availability of withdrawal and deposit facilities in local communities across the UK¹. The FCA said the guidance is not intended to overlap with, or pre-empt, decisions about those new powers, and that it will review the guidance and revise it if appropriate in respect of the new access to cash powers or further developments in retail banking¹.