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New rules to help maintain cash access set out by FCA

New rules requiring banks and building societies to assess and plug gaps in local cash provision have been proposed by the City regulator.

The Financial Conduct Authority (FCA) has set out the plans to help maintain reasonable access to cash for people and businesses across the UK.

The FCA said its new powers will not prevent bank branches from closing – but the rules will have an impact where branches are a key local source of cash.

The plans follow new powers granted to the regulator by the Financial Services and Markets Act 2023.

These proposals set out how banks and building societies will need to assess and plug gaps in local cash provision. This will help manage the pace of change and ensure that people can continue to access cash if they need it

Sheldon Mills, FCA

The rules will require banks and building societies designated by the Government to assess and fill gaps, or potential gaps, in cash access provision that significantly impact consumers and businesses.

Assessments will need to take into account local factors, such as demographics and transport. Where firms identify gaps, they will need to act to address these needs, the regulator said.

Concerns have been raised over the years that “cash deserts” could be created by bank branch closures and difficulties accessing free ATMs.

The FCA’s consultation document said: “Our data suggests that in the two years to (the first quarter of) 2023, 1,391 bank and building society branches closed, as did 2,176 free-to-use ATMs.”

The FCA also wants to prevent people from facing unreasonable costs to access their money, which could be through charges, travel costs or time.

Sheldon Mills, executive director of consumers and competition at the FCA said: “We know that, while there is an increasing shift to digital payments, over three million consumers still rely on cash – particularly people who may be vulnerable – as well as many small businesses. It’s important that we support consumers impacted by recent innovations.

“These proposals set out how banks and building societies will need to assess and plug gaps in local cash provision. This will help manage the pace of change and ensure that people can continue to access cash if they need it.”

In the first quarter of 2023, 95.1% of the UK population were within one mile of a free-to-use cash withdrawal point, such as cash machines or Post Office branches, with 99.7% of the UK population being within three miles.

The availability of cash access services can impact local communities, economies and high streets, and so it is important to meet local needs, which may change over time, the regulator said.

Under the proposals, designated firms will be required 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.

The FCA said the rules will work in harmony with its existing guidance on bank branch closures.

The acceptance or non-acceptance of cash by retailers is not being looked at by the consultation. The FCA said that existing law allows retailers to decide whether to accept cash or not – so it cannot require them to do so.

The consultation will remain open until February 8 and the FCA expects to finalise the rules by the third quarter of 2024.

The volume of payments in the UK that do not involve cash surged from around 46% to 86% in the decade to 2022, according to the FCA’s consultation document.

This rise has been driven by new ways to pay and changes in customer behaviour, with the coronavirus pandemic also impacting cash use.

However, the FCA’s Financial Lives 2022 survey indicated that 3.1 million adults (6%) had used cash to pay for everything or most things over the 12 months to May 2022.

In England and Wales the proportion was 5%, in Scotland it was 7% and in Northern Ireland it was 13%.

Some banking hubs, whereby different banks share a single site, have been set up to help plug the gaps.

People can also carry out everyday banking over the counter at Post Office branches.

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