UK banks will have to flag up plans to shut branches or cash machines

People at Cashpoint and a Dog

Banks and building societies will have to alert regulators if they plan to close branches or cash machines and must prove they considered the impact on consumer access to cash, according to rules proposed by the City regulator.

Under draft guidelines from the Financial Conduct Authority (FCA), lenders will also have to show they have explored alternatives to support cash access in areas affected by the closures. Alternatives could include mobile banking hubs, cash delivery, commissioning free-to-use ATMs, and will have to be clearly outlined to customers at least three months in advance.

“This would give customers time to take action in light of that information, such as changing banking provider,” the FCA said.

The guidelines – which are up for consultation but could be in force by December – will ensure people can continue to withdraw and deposit cash, and make cash or cheque payments for mortgages and loans. Firms that breach the guidelines would face enforcement action, including fines.

It is part of a wider effort to help preserve cash infrastructure as local branches and free-to-use cash machines disappear across the UK. Banks and building societies have closed or scheduled the closure of more than 3,500 UK branches since January 2015, according to the consumer group Which?. Meanwhile, about 9,500 free-to-use cash machines disappeared in the past two years alone.

The Covid-19 pandemic is accelerating the shift to digital payments, as retailers and customers opt for card over cash. Cash advocates say small businesses, as well as elderly or vulnerable people who cannot use the internet, afford broadband for online banking or open bank accounts are at risk of being left behind.

One in 10 adults have said they did not know how they would cope in a cashless society. The proportion rose to one in six for vulnerable customers, according to an FCA survey.

Sheldon Mills, the resgulator’s interim head of strategy and competition, said: “‘Access to cash is a priority for the FCA. While in the recent climate we have seen some consumers move to digital payments, we have also seen the importance of the continued availability of cash to many consumers, including those most vulnerable.

“Firms have managed access well through Covid-19, and we have seen many good examples of how they have used alternatives to branches and ATMs during the crisis,” he added.

“We expect them to build on this work and to continue to think about consumer needs as they take decisions on future closures.”