Banks could be blocked from closing branches through FCA legislation

by Joseph K. Clark

The Financial Conduct Authority (FCA) is considering regulations that could give it the power to block the closure of bank branches to ensure people are not left without easy access to cash.

According to a report in the Financial Times, the power could be brought in as part of HM Treasury’s plan to ensure the FCA can guarantee “reasonable” access to cash for the public. This would mean face-to-face availability as well as ATMs.

Citing an unnamed source, the FT revealed that the FCA could have new powers that “will allow [it] to say, ‘If there aren’t good enough face-to-face services in place, we can block [branch closures]’.”

Banks have been slashing the number of branches they operate over recent years to reduce operational costs and move customers to digital services.

This all began during the global financial crash of 2008 when huge losses hit banks. This has accelerated in recent years as banks face intense competition from digital-only banks, which operate on a relative shoestring.

The Covid-19 pandemic moved more people to digital channels while branches were closed, then supercharged closure strategies. In June, Lloyds Banking Group said it would close 44 branches this year, including sites in London, as the industry moves customers to digital channels, for example. Following the latest closures announced by Lloyds, the Unite union accused the bank of “walking away from local communities”.

When HSBC recently announced it was closing 82 branches, it said the pandemic had “crystallized its thinking” regarding reducing reliance on its branch network to serve customers.


Technology has enabled banks to shutter branches and move customers to digital channels. According to the Economist Intelligence Unit (EIU) report for financial services software firm Temenos, 65% of executives believe the branch-based banking model will die in five years.

According to two-thirds of the senior banking executives who responded to the survey, the latest technologies, such as cloud, artificial intelligence (AI), and application programming interfaces (APIs), are the drivers of this transformation.

The UK is not the only country where bank branch networks are being decimated. In Spain, the BBVA is making more than 2,000 staff working in its branch network redundant as it closes 480 branches in the country – and this was a reduced number after pressure from politicians.

After an initial cost of €960m, the bank said it should save an estimated €250m a year from 2022. BBVA said the increasing use of digital channels and competition from digital banks with low-cost bases were significant factors in its decision.

Meanwhile, Germany’s second-biggest bank, Commerzbank, closes more than 340 branches and slashes one-third of its staff – around 10,000 workers – to cut costs.

Sweden’s Handelsbanken said it would cut its branch network by nearly half. At the same time, a merger at France’s Societe Generale, with the coming together of its retail business and Credit du Nord subsidiary, will see 600 of its 2,100 branches close.

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