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Along with updated good practice, the UK's Financial Conduct Authority (FCA) is toughening its stance on temporary changes to branch services made during COVID-19 that have now become permanent.
The FCA has published a set of good practice recommendations for banks and building societies to follow when deciding to convert or close down services, such as branches and ATMs.
Although the FCA makes clear the decision to close a branch or ATM is a commercial decision for firms to decide, the regulator expects firms to assess how closure plans will affect customers, particularly those in vulnerable circumstances, and to make appropriate arrangements to ensure their needs are still met.
The examples are based on guidance from 2020, published when there was a concern about branch closures caused by the COVID-19 pandemic. Examples of poor practice include:
- Relying on remote analytics instead of on-site assessments.
- Recommending other services that are due to be closed or reduced as alternatives.
- Not considering the geography and ease of travel of remaining branch locations.
- Not using a wide range of communications, particularly following up decisions in writing for people with poor memory.
In a press release, Sheldon Mills, executive director of consumers and competition at the FCA, said: “We expect firms to continue to offer easy and accessible banking services to their customers, and this is even more important as the country faces a cost-of-living crisis.
“We saw firms successfully do this and support consumers through the pandemic, and this standard needs to continue with firms really thinking about their customers, especially those in vulnerable circumstances, and ensuring they continue to meet their needs.”
When temporary becomes permanent
At the same time, the FCA has published a consultation on requirements for more detailed analysis on how firms assess the impact on customers.
The regulator is concerned about the level of changes being made to physical services, with firms “permanently and significantly” reducing opening hours and removing facilities such as counters following temporary changes introduced because of COVID-19.
The FCA wishes to extend its guidance on “partial closures”, which are for the most part not currently covered, whereby firms would assess customers’ needs and consider the availability and provision of alternatives, before making a decision.
A partial closure would now be considered a change outlined above for more than six months.
Additionally, although not explicitly mentioned, the FCA is likely to also be clamping down on attempts by banks to push consumers onto digital channels.
“In some cases firms make decisions to close branches that are still being used by significant numbers of customers.”
However, despite recommending firms to consider alternatives such as community banking hubs, the FCA wants banks to also consider the long-term provision of these services and the impact to customers if “such venues are later changed or withdrawn”.
