(Bloomberg) -- Fourteen of the UK’s largest banks, including HSBC Holdings Plc, Barclays Plc and NatWest Group Plc, 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 Sept. 18, the Financial Conduct Authority said in a policy statement Tuesday.
The move comes after a spate of branch closures across the UK sparked concerns that customers and businesses who depend on cash will be left without easy access. In the two years through June 2023, some 1,358 bank and building-society branches and 4,450 ATMs closed, according to the FCA. In the past few years, lenders including HSBC, TSB and Lloyds Banking Group Plc have announced plans to shutter hundreds of branches across the country 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 the UK fell by 65% between 2015 and 2021, according to the FCA. Still, a minority of individuals in the UK still rely on cash payments, particularly individuals from low-income households or those who lack digital skills and access.
Around 6% of adults used cash to pay for everything or most things in the 12 months through May 2022, according to research conducted by the regulator released Tuesday. That rose to 9% 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 ($19,000).
The new rules come after the financial watchdog opened a consultation on establishing an access-to-cash regulatory regime last year. 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,” 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, the UK’s largest lenders set up Cash Access UK Ltd, a not-for-profit firm 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.
The UK’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 members of Parliament that customers were making the shift to online banking in droves, making many branches unnecessary.
“Cash continues to play a vital role in the lives of millions of people and businesses across the country, so I welcome the FCA’s new rules,” Tulip Siddiq, economic secretary to the Treasury, said in an emailed statement. “Our commitment to roll out 350 banking hubs will also help provide local communities with access to the critical banking services people rely on.”
(Updates with Siddiq’s comment in final paragraph.)
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