UK’s financial regulator urges banks to rethink branch closures

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The UK’s financial regulator has called on banks to reconsider branch closures amid fears that vulnerable customers could be left without access to services.

The Financial Conduct Authority said that during lockdown branch closures should be paused or delayed if banks were unable to carefully assess the needs of customers and what alternative arrangements they could provide.

“Some banks and building societies have informed us that they are either going ahead with branch closures already announced, or announcing new branch closures during the current lockdown,” it said. “We are concerned that these activities could have significant consequences for customers.”

The FCA said lockdown meant it may be harder than usual to engage with customers on closure proposals, and some who would need access to in-branch services before a closure would not be able to visit. Customers who needed help setting up online banking may not be able to access that at present, it said.

This month HSBC said it would close 82 branches in 2021, and TSB and the Co-operative Bank have also announced closures since the pandemic hit.

The FCA issued guidance in September outlining how it expected banks to treat customers if they planned closures.

It said on Thursday: “Where they are unable to meet the expectations of our guidance during lockdown measures, they should consider pausing or delaying new branch closures where possible, particularly where this could have significant impact on vulnerable customers.”

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Concern over those customers has led the consumer group Which? to write to the UK’s largest banks asking them to commit to maintaining access to cash, after its research found 13,000 cash dispensers had disappeared in just three years.

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In a letter sent to the eight biggest retail banks, the organisation’s chief executive, Anabel Hoult, urged them to remain part of the Link and Post Office banking networks, saying this would help bring stability to the sector.

“Worryingly, Covid-19 has placed unprecedented strain on the cash system that was already in a precarious position,” she wrote. “Urgent steps must be taken to ensure that irreversible damage is not caused to the cash system until longer-term protections are agreed.”

Since the start of 2020, 3,300 free-to-use cash machines have closed across the UK, Which? said, and over the past three years the total number of ATMs has fallen from 67,300 to 54,400.

The pandemic has changed many people’s payment choices, and this week the FCA said it was considering raising the limit for contactless payments from £45 to £100.

However, research by Which? found almost 10 million people were not ready to stop using physical money. Despite last year’s budget announcing legislation to protect access to cash, there is no timetable in place for new laws to come in.

Which? is calling on banks to confirm they will continue to belong to the Link network of ATMs and to the Post Office banking framework until legislation comes into effect.

It said that if one of the major banks pulled out, this would make the schemes unviable and it would be “extremely difficult” to introduce access to cash in some communities if it was lost.