The financial watchdog cannot stop banks from shutting down local branches, senior official admits

• More than 5,800 bank and building society branches have closed in nine years

The financial watchdog is powerless to prevent banks shutting local branches, a senior official admitted yesterday.

Bosses from the Financial Conduct Authority (FCA) and the Bank of England were hauled in front of MPs yesterday after campaigners warned that communities across the country were being left stranded.

More than 5,800 bank and building society branches have closed since the beginning of 2015 – and at least 189 more are scheduled to shut this year.

The FCA’s director of retail banking, David Geale, acknowledged that access to cash was ‘vitally important’ but admitted the watchdog currently has no powers to intervene or stop branch closures.

While the regulator outlined strict new rules in December making it harder to rip out free cash machines when they close branches, Mr Geale said these are not expected to come into force until autumn.

Campaigner Derek French told the Treasury Committee that banks were ‘rushing through branch closures’ ahead of any rule change.

He added: ‘They’re cracking on and closing as many branches as possible in order to escape these obligations.’

Committee chair Harriett Baldwin MP said she feared very few branches could soon be left: ‘At the pace that banks are closing branches, do you think there will be any left by the time you [the FCA] come up with answers?’

Under the proposed rules, Mr Geale said banks and building societies closing the last branch in communities could have just three months to put a banking hub combining services from several lenders in place.

If banks haven’t come up with alternatives for the community to access the cash they need, the regulator could ask them to pause the closure until one is found, said Mr Geale.

This will be a lifeline for vulnerable and elderly customers who rely on local branches and cash machines to access their money.

Pressure is mounting for the regulator to act as it last week emerged that almost three million people will be living in a ‘banking desert’ by the end of the year.

Some 30 parliamentary constituencies – an estimated 2.8 million people – will have no physical bank branches by December, according to consumer group Which?.

Seven more constituencies will be made bankless throughout the year in addition to the current 23.

Some three in five cash machines will have disappeared from the high street by the end of the decade, according to cash machine network group Link.

A huge 23,000 ATMs are expected to close, leaving just 15,000 cash machines.

But despite the mass exodus of these vital services from towns, cash usage is on the rise.

It grew for the first time in a decade in 2022 as squeezed households opted for notes and coins to manage their budgets.

Cash payments made up 19 per cent of transactions in 2022, up from 15.2 per cent one year previous, according to the latest figures available from the British Retail Consortium.