FCA finalises access to cash rules

What does this mean?

The FCA’s final rules and guidance will require designated firms to carry out more frequent and wide-ranging assessments of access to cash provision, and to fill any potential or identified gaps. The new regime will work in tandem with existing FCA guidance on branch and ATM closure or conversion (FG22/26). 

The FCA confirms that it will proceed with the new cash access regime broadly as consulted. It also provides additional clarity and guidance on specific aspects of the regime, for example, on the factors to be considered when assessing if there is a cash access deficiency and the situations considered as a material reduction in services. 

The rules introduce a three-step framework for firms to assess and remediate cash access deficiencies in local areas:

• Step 1: Establish if there is, or would be after a closure/material change, a deficiency in cash access. 

• Step 2: If there is a deficiency, consider if it has or would have a significant impact.

• Step 3: If it does, identify what additional services would be reasonable to provide.

Designated firms will be required to carry out cash access assessments in response to:

• Closures of, or material reductions/changes to the provision of cash access services at an existing facility.

• Receipt of a cash access request from someone with a ‘sufficient interest’ e.g. a local resident or council. The FCA will also be able to request assessment for a particular area. 

These assessments will have to consider both the specified services (i.e. deposit or withdrawal services, for business or personal customers) and specified features (e.g. reasonable mix of both coins and banknotes).

The FCA accepts that firms may work together, through a designated coordination body, to undertake assessments and provide shared cash services, subject to competition law. The regime also allows for firms to act independently.

The FCA has extended the time firms have to complete their assessments to 12 weeks from the point at which a request is submitted.

Under Step 1, firms should consider factors such as the demand for and capacity of existing services, and the travel time and cost to alternatives in a defined local area. If only one branch remains (‘last branch in town’), the assessment must conclude a deficiency exists in at least some services. 

Under Step 2, firms must assess whether the deficiency causes, or will cause, significant impacts on consumers and SMEs in the local area (not just the firm’s customers). 

The FCA sets out a non-exhaustive list of factors that should form an assessment in Step 2. It expects firms to pay particular regard to consumers and SMEs with characteristics which indicate they are more likely to rely on cash (e.g. digitally excluded consumers or consumers with low financial resilience). 

The FCA maintains its approach to not setting numerical criteria or thresholds for numbers of consumers or businesses affected for assessing the significance of impacts. It expects firms to establish, assess and periodically review their own assessment policies and processes, using a wide range of open source and commercial datasets to inform its assessment. 

Where a significant impact is identified, all designated firms will be responsible for putting in place additional services. The FCA expects these services to be in place within three months, unless in exceptional cases. 

The final rules provide firms with flexibility to choose the most appropriate type of facility to deliver the additional services. Additional flexibility is also provided in the final rules, as firms will be required to provide additional services for a minimum of two years before a further assessment can be made to determine if there remains a demand for the continuity of cash access services. 

Designated firms will be required to publish details of their cash access assessment criteria, and to notify the FCA of any substantial changes to this. Firms will also be required to establish a process to allow assessment outcomes to be reviewed. 

The FCA will require designated firms to submit data to the regulator on branch monitoring and any planned closures three times a year. Firms must also notify the regulator and other designated entities of closures and material reductions/changes to services ‘as soon as reasonably practicable’. The FCA will also collect information from firms through ongoing supervisory engagement.

What do firms need to do?

Firms should consider the strategic and operational implications of the final rules, as the requirement to undertake cash access assessments and to fill any gaps in cash provision will commence when the rules go live. 

The FCA makes clear that while some progress has been made on industry cash initiatives such as banking hubs, it expects designated firms and coordination bodies to work together to increase the pace of deployment and develop further options for cash access. The Labour party has also committed to opening 350 banking hubs over the course of the next five years. Firms should consider innovative and collaborative solutions to ensure they comply with the rules in a cost-effective way. 

Firms should be assessing the comprehensive data, policies, processes, governance, and systems and controls that will be required to conduct cash access assessments and comply with the final rules. Information required to conduct assessments will include detailed data and insights on the populations, facilities and geographic features of local areas (extending far beyond a bank’s own facilities and customer base). Use of geospatial analysis techniques may be one way to undertake the analysis in a robust and efficient manner. Firms should be operationally prepared to meet a potential high initial volume of cash access requests.

Firms should use the eight week implementation timeline to establish and publish their cash access procedures, prepare to receive cash access requests, and prepare to comply with the new reporting requirements.

Next steps

The rules come into force on 18 September 2024. 

Following receipt of a cash access assessment request, designated firms will have 12 weeks to finalise its assessment. Firms will have a further three months following the publication of the assessment outcome to provide any additional cash services.