FCA urges banks to protect access to cash

The FCA introduced the rules in the previous year alongside a consultation that concluded in February. The Financial Services and Markets Act of 2023 mandated the regulator to guarantee adequate provision of cash deposit and withdrawal services.

According to new rules announced by the Financial Conduct Authority on Tuesday, major UK banks such as Barclays and Santander must evaluate and address deficiencies in their cash access services starting from September 18. The regulations aim to safeguard vulnerable customers and small businesses, which have been disproportionately affected by bank branch closures in recent years. According to analysis, a consumer organization, more than 60% of the UK's bank branches have closed since 2015 through May of this year, with Barclays leading in reductions to its network.

What Is the Financial Conduct Authority (FCA)?

FCA stands for the Financial Conduct Authority. It is the regulatory body in the United Kingdom responsible for overseeing financial markets and ensuring that financial firms operate in a way that protects consumers and promotes market integrity. The Financial Conduct Authority (FCA) oversees the financial services industry in the UK, ensuring consumer protection, stability in the sector, and fostering competition among financial service providers. The FCA regulates various sectors including banking, insurance, investment firms, and financial advisors. Its primary objectives include maintaining confidence in the financial system, promoting competition, and protecting consumers.

The FCA was founded on April 1, 2013, taking over regulatory oversight and certain prudential responsibilities from the Financial Services Authority (FSA). Its statutory objectives were established under the Financial Services and Markets Act 2000, which were subsequently amended by the Financial Services Act 2012. This Act introduced significant reforms to the regulation of financial services firms in the UK, aimed at enhancing risk management and containment measures in response to the 2008-2009 financial crisis.

The impacts of the FCA

As stated on the FCA's website, the authority oversees the conduct of approximately 50,000 businesses, supervises 48,000 firms, and establishes specific standards for around 18,000 firms. Its objective is to maintain fair and transparent markets that benefit individuals, businesses of all sizes, and the broader economy. The FCA achieves this by safeguarding consumers, ensuring the integrity of financial markets, and fostering competition. The FCA operates under the oversight of the UK Treasury and Parliament.
The FCA possesses extensive authority to enforce its responsibilities, which encompass rule-making, investigative capabilities, and enforcement powers. As an independent entity without government funding, the FCA relies on fee assessments. These fees are levied on authorized firms engaged in regulated activities overseen by the FCA, as well as on entities like recognized investment exchanges.

FCA confirms plan to protect access to cash

Under new rules unveiled today by the Financial Conduct Authority (FCA), banks and building societies must assess whether local communities have adequate access to cash services such as branches and ATMs, and address any substantial deficiencies.

According to the FCA, from 18 September, banks and building societies will need to:

• Assess cash access and understand if additional services are needed, when changes are being made to local services.
• Respond to local residents, community organisations and representative groups, who will be able to request an assessment of whether there are gaps in local cash access.
• Where significant gaps are found, deliver reasonable additional cash services.
• Keep facilities, including bank branches and ATMs, open until any additional cash services identified are available. 

The UK Finance report on UK payment trends during 2023 showed cash remained the second most popular payment method despite falling to six billion transactions - a share of 12%.

The data showed 38% of the 48 billion total were contactless payments. For its part, the FCA has signaled that it is not unduly worried by the state of play in access to cash, with a growing number of so-called banking hubs and generic Post Office services filling much of the void left by branch and ATM closures.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:
“Three million people continue to rely on cash, even as digital payments become more popular. And many small businesses still need somewhere to safely deposit their takings each day.”
“That’s why we’ve acted quickly in response to new powers given to us by Parliament to ensure reasonable access to cash withdrawal and deposits is maintained.”

The FCA has amended the rules it previously consulted on, which now include extending the timeframe for banks and building societies to conduct assessments of cash access. This extension allows local communities more opportunity to present their perspectives.

Additionally, firms will have the ability to reassess the provision of identified cash services after a period of two years. Furthermore, the FCA has released research detailing the demographics that heavily depend on cash. The findings highlight that individuals in low-income households (earning less than £15,000 annually) and those with limited digital skills or access show the highest reliance on cash.

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