Britain says banks must preserve access to cash after branch closures threaten the vulnerable

LONDON – Fourteen of Britain’s largest banks, including HSBC Holdings, Barclays and NatWest Group, must ensure local communities can still easily access cash, the country’s financial watchdog said, as a wave of local branch closures threaten vulnerable customers.

The designated banks and building societies will be required to consider the potential impact of closing a branch on the local community and are responsible for plugging significant gaps in cash services where needed, starting from Sept 18, Britain’s Financial Conduct Authority (FCA) said in a policy statement on July 23.

The move comes after a spate of branch closures across Britain sparked concerns that customers and businesses who depend on cash will be left without easy access. In the two years until June 2023, 1,358 bank and building-society branches were closed, and 4,450 automated teller machines (ATMs) were discontinued, according to the FCA.

In the past few years, lenders including HSBC, TSB and Lloyds Banking Group, have announced plans to shutter hundreds of branches across Britain after the number of customers visiting physical locations plunged.

The FCA said its powers won’t stop banks from closing local branches. However, under the new cash-access policy, lenders will be required to keep open facilities, including bank branches and ATMs, until alternative cash-access services are found to be available.

An increase in digital payments means the volume of annual cash payments in Britain fell by 65 per cent between 2015 and 2021, according to the FCA. Still, a minority of individuals in Britain still rely on cash payments, particularly individuals from low-income households or those who lack digital skills and access.

Around 6 per cent of adults used cash to pay for everything or most things in the 12 months until May 2022, according to research conducted by the regulator released on July 23. That rose to 9 per cent among vulnerable groups, including consumers who are digitally excluded, have poor health or live in a household with an annual income of less than £15,000 (S$25,000).

The new rules come after the financial watchdog opened a consultation on establishing an access-to-cash regulatory regime in 2023.

The FCA said it has changed some of the rules it consulted on, including extending the period for banks to carry out cash-access assessments and giving local communities more time to make their case for maintaining services.

“Three million people continue to rely on cash, even as digital payments become more popular,” Mr Sheldon Mills, executive director of consumers and competition at the FCA, said in a statement. “And many small businesses still need somewhere to safely deposit their takings each day.”

In 2022, Britain’s largest lenders set up Cash Access UK, a not-for-profit company designed to ensure access to cash. But delays in filling gaps through the industry-run, voluntary initiative mean several communities have been without cash-access services for more than a year, “causing unreasonable barriers and costs for consumers and businesses”, the FCA said.

Britain’s big lenders recently came under fire from lawmakers, who say that substitute banking “hubs” in unusual locations are not providing customers with the privacy needed to discuss financial issues.

Banking executives told British MPs that customers were making the shift to online banking in droves, making many branches unnecessary. BLOOMBERG