FCA will hand new cash responsibilities to UK banks and building societies

Under the new rules firms providing accounts to personal and business customers, such as banks and building societies, are required to maintain reasonable access to cash across the UK. Businesses involved in the supply of cash, such as the Post Office or operators of cashback, would also be bound by the new rules. 

The proposals (27 pages/1,232KB) mean that these businesses would be required to perform local cash access assessments to check for cash deficiencies around the areas, examining whether these deficiencies are likely to cause detriment to the local community.

Consumer credit and payment services expert Andrew Barber of Pinsent Masons said that the measures will require planning from businesses considering closing branches. 

 “Under the proposed rules, closure of local branches will require additional thought on the part of designated providers as branch closure is one of the triggers for an access to cash assessment,” he said.  

“The consultation anticipates that an access to cash assessment will be broader than the assessment of customers’ ability to access branch services under the FCA’s guidance on Branch and ATM closures. Designated providers will need to plan for this assessment and any possible solutions that may be required in their wider planning around branch networks,” said Barber.

When assessing possible detriment under the plans, businesses will need to look at the local demographics, the geography of the areas and any impacts the availability of cash may have on vulnerable customers. If any gaps are identified, businesses will need to ensure additional services are delivered. If a deficiency with significant impact is identified, then solutions must be identified to address the access to cash need.

The proposals state that anyone with sufficient local interest – such as local community groups, businesses or residents – will be able to ask to see the access to cash assessments.

Under the proposals, businesses will also need to ensure they do not close cash facilities, such as bank branches, until any additional cash services identified are available. 

Barber said: “The ability for local residents and community groups to request an access to cash assessment is an important feature that gives significant power to communities to trigger action. Designated providers may be able to satisfy some requests through improving local knowledge of the facilities in the area, but it is likely that a number of assessments will be required at least in the early days of these rules if they are made.”

Despite just 14% of all UK payments in 2022 made by cash, according to the FCA, cash payments are heavily relied upon by small business and vulnerable groups. 

Financial regulation expert Caroline Whitten of Pinsent Masons said: “While the UK is quickly becoming a mostly cashless society, the proposed rules are vital in ensuring that the cash-reliant groups, such as elderly residents and small businesses, can still access cash when needed. The data in the consultation illustrates the importance of access to cash for significant sectors in society, including those who are classed as vulnerable by the FCA in relation to their general financial services regulation.”

While the new rules do not prevent institutions from closing local branches, they will impose additional requirements to meet before a decision to close a branch is made. These requirements include finding alternative cash services for local residents that would be impacted by such closure. The FCA also proposes that additional rules are implements, such as responding to cash requests from residents as well as providing customers with information where and how cash can be accessed. 

The proposals aim to address the needs of vulnerable people in society, with these residents protected from unreasonable costs due to the “new cost-efficient and effective cash solutions”. 

The proposed changes come because of new powers granted to the FCA by the Financial Services and Markets Act (FSMA) 2023. Businesses will have an initial 12 weeks to carry out any requests under these measures, with the FCA expecting a spike in requests at first. After this, firms, including banks, will need to respond within eight weeks of a request for assessment. 

Consultation on the FCA proposals is open until 8 February, with plans to finalise the new rules in the second half of 2024.