Financial Conduct Authority sets out new rules to protect access to cash
Banks and building societies will have to plug gaps in local cash provision under new rules proposed by the Financial Conduct Authority (FCA).
Legislation that came into force in June gave the watchdog new powers to ensure people could conveniently withdraw and deposit cash following the rapid rate of bank and ATM closures.
The FCA said its new rules will not prevent bank branches from closing but will help ‘manage the pace of change’ and mean that any location set to lose a bank or other cash access point (such as an ATM) must have alternative provisions in place before it shuts.
Here, Which? explains the latest proposals and what existing measures are in place to protect access to cash.
What the FCA plans to do
The FCA has now published details of how it proposes to implement its new responsibilities to guarantee reasonable provision of free access to cash.
The new proposals will require banks and building societies designated by the government to assess, fill gaps or potential gaps in cash provision that significantly impact consumers and businesses.
Designated firms will have to:
- Undertake cash access assessments when changes are being made to cash access services – to understand whether additional services are required to meet local gaps.
- Respond to requests from local residents, community organisations and representatives to consider, assess and plug gaps.
- Deliver reasonable additional cash services to fill gaps in provision where assessments show that there is or will be a significant local gap.
- Ensure they do not close cash facilities, including bank branches, until any additional cash services identified are available.
- Provide customers with clear information about where they can access cash services and how to raise concerns about a deficiency in cash access in their local area.
The FCA said the rules will work in harmony with its existing guidance on bank branch closures.
- Find out more: bank branch closures: is your local bank closing?
What else did the consultation include?
The consultation also commented on the following factors:
Local factors taken into account
Back in August, the government set out the minimum distances for access to free cash withdrawals and deposits.
It said the vast majority of those who live in urban areas will have access to free cash withdrawal and deposit services within one mile of where they live.
Those in rural areas can expect the same services within three miles of where they live.
The Treasury said the distances were chosen to maintain the current level of coverage of cash services, including ATMs and face-to-face services.
The FCA said it will take the distances set out by the government as a starting point to determine where there are deficiencies in cash access.
- Find out more:new minimum distances for cash services
Concern with slow rollout of banking hubs
The FCA welcomed the voluntary industry approach to deliver shared banking hubs, but said it is ‘concerned the current and significant delays in installing services risks harming cash reliant SMEs and individuals’.
Banking hubs involve banking providers working together to offer basic cash services in communities where bank branches and ATMs have closed. But just 23 of the 101 pledged are operational so far, with another seven expected to open before the end of the year.
The FCA added that ‘more must be done to improve the timely delivery of services following the closures of facilities and where cash access gaps have been identified.'
Powers do not extend to cash acceptance or branch closures
The FCA’s new powers will not prevent existing bank branches from closing, but its measures will have an impact where branches are a key local source of cash.
The FCA also said it would not include proposals to make retailers and businesses accept cash. This is because, under existing law, it's down to the retailer to decide whether or not it accepts cash, so the FCA can't require them to do so.
- Find out more:what are the rules on paying with cash?
Timings
The consultation will remain open until 8 February 2024, and the FCA expects to finalise the rules towards the end of 2024.
What is the Financial Services and Markets legislation?
The legislation was first committed to in the Queen's Speech in 2022, and aims to 'strengthen the United Kingdom's financial services industry, ensuring that it continues to act in the interest of all people and communities'.
Which? worked tirelessly on the bill as it made its way through parliament, to ensure it remained as strong as possible, and successfully campaigned for the government to introduce an amendment on free access to cash.
The amendment ensured that people could withdraw and deposit cash for free, which means the FCA has greater power over major banks and building societies to ensure reasonable free access to cash is preserved for those who need it.
- Find out more: new rules to protect cash access and scam victims become law
Why does access to cash need protecting?
Link, the UK’s largest cash machine network, estimates 5.4 million adults rely on cash in their day-to-day lives.
Yet nearly 15,200 free-to-use ATMS in the UK have been lost since 2018, leaving many areas across the UK with particularly poor access to cash.
On top of this, Which? analysis has found almost half of the UK’s bank branch network has closed since 2015.
Banks and building societies have closed (or scheduled the closure of) 6,007 branches since January 2015, at an average rate of around 54 each month.
