U.K.: Overview of the Cash Access Regulatory Provisions
Remarkably, the 1st Reading in the House of Commons of the Financial Services and Markets Bill 2022 took place on 20 July 2022, less than two weeks after the resignation of Prime Minister Boris Johnson. Since then, the UK has seen two new Prime Ministers and the same number of new Chancellors of the Exchequer.
Partly, no doubt, due to changes at the top of government, the Bill is still at the Report Stage in the House of Lords. Once this stage ends, there will be a 3rd Reading in the Lords. After that, the government will consider proposed amendments that have arisen during progress in the 2nd House. If any are accepted, they will be incorporated into the Bill, which will then be put before the King for the formality of Royal Assent. The Royal Assent is expected early in the coming Summer.
Only Part 2 of the seven-part Bill deals with access to cashMoney in physical form such as banknotes and coins. More – and Part 2 is the minor section of this 346-page document, with only four lines of text. Those lines of text refer readers to Schedules 8 and 9, which run to 25 pages between them.
Schedule 9 is focused on wholesale cash distribution, which will be covered in a future article.
Reasonable Provision of Cash Access Services
Schedule 8 covers cash access. In the Schedule, a “cash access service” is defined as— (a) a service which enables cash to be placed on a relevant current account (a “cash deposit service”) or (b) a service which enables cash to be withdrawn from a relevant current account (a “cash withdrawal service”).
Schedule 8 also (a) requires the Treasury to publish a statement of policy concerning cash deposit and withdrawal services, (b) enables the Treasury to designate persons involved in the provision of such services, and (c) gives the Financial Conduct Authority (FCA) functions about designated persons.
The role of the FCA is crucial because the FCA must exercise its functions to seek to ensure the reasonable provision of cash access services in the United Kingdom or a part of the United Kingdom.
Crucially, “reasonable provision” of cash access services is the provision of such nature and extent as the FCA may determine, having regard to— (a) the cash access policy statement [of the Treasury] currently in effect and (b) such other matters as it considers appropriate.
In practice, therefore, the HM Treasury will agree with the FCA on a reasonable provision of cash access services, and the FCA will then take steps to ensure that the level of provision is achieved.
The steps envisaged can include requiring actions by “designated persons” – customarily expected to be banks – and imposing penalties where the necessary measures are not carried out.
This new role for the FCA comes after the cash industry had agreed on measures to deal with issues impacting cash access brought about by bank branch closures. This agreement, which took effect on 1 January 2022, obliges banks and building societies to report their proposed branch closures to Link Scheme Holdings Limited, the not-for-profit responsible for the UK’s ATM Network. LINK then assesses the cash access needs – both deposit and withdrawal – of communities due to the proposed loss of bank branch services and decides what action is appropriate.
Free-to-use ATMs and Bank Hubs
To dateThe year in which a medal or coin was minted. On a banknote, the date is usually the year in which the issuance of that banknote - not its printing or entering into circulation - was formally authorised. More, LINK has judged that in around 90% of communities, no action is needed.
In the remaining 10% of cases, LINK has opted for one of three actions. The first option is the installation of a new Free-to-Use ATM. This option is usually only applicable if there is no existing Free-to-Use ATM within a one-kilometre radius of the centre of the community. Each new ATM is installed and operated by a LINK member, with enhanced financial arrangements to guarantee the ATM is profitable.
The other two options open to LINK are usually only relevant in communities with seventy or more businesses which accept cash payments.
In such communities, LINK can require either a cash deposit facility or a “Bank Hub” to be installed. These requirements are to be met by a new not-for-profit set up by nine UK banks and building societies, namely Cash Access UK Limited. What constitutes a “Bank Hub” has yet to be precisely defined. Still, implementation to date has featured stand-alone premises, with each of the Big Five UK banks providing a “host” one day per weekday and cash deposit and withdrawal services being provided by the Post Office.
So far, no separate cash deposit facilities have been installed in any community, and only a handful of Bank Hubs have been opened.
Defining Reasonable
The Financial Services and Markets Bill will insert the FCA into this picture. It seems likely that the FCA will work with LINK and Cash Access UK Limited to decide what it is “reasonable” to provide going forward about cash access services.
For example, there is much speculation currently that the FCA may require a large number of Bank Hubs to be installed, perhaps as many as 2000, whereas it is believed that the banks funding Cash Access UK Limited are hoping at most 200 will be needed.
What is clear is that under the provisions of the Financial Services and Markets Bill, HM Treasury can issue a new policy statement on cash access each year. This, in turn, means that a UK government can use such information to revise the definition of “reasonable” – or even to remove that word entirely – and to give new functions to the FCA.
To say the least, these are exciting times ahead for cash access in the UK.
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