Bank closures to ‘make matters even worse’ for low interest rates – get ready now | Personal Finance | Finance

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Cash access came into focus recently as three announcements on the future of cash were made on the same day. On May 13, UK Finance published a commitment to long term access to cash, which was signed by a number of banks including Barclays, HSBC and Santander.

Additionally, the Financial Conduct Authority (FCA) published a joint statement with the Payment Systems Regulator (PSR) on the importance of cash usage.

On top of this, Sheldon Mills, the Executive Director for Consumers and Competition at the FCA gave a speech on cash usage at the Which? Cash Summit.

With all this commitment, savers may be reassured that their financial futures are secure and poised for recovery.

But, unfortunately, analysis from Hargreaves Lansdown shows the future for savers may be bleak, especially when factoring in the low interest rate environment.

READ MORE: Savings ‘inertia’ forces billions into NS&I premium bonds

Sarah Coles, a personal finance analyst at Hargreaves Lansdown, commented on this: “The bank branch network has been imploding for years, but the pandemic picked up the pace, and piled pressure on the industry to protect people who need face-to-face banking.

“It looks increasingly like the solution isn’t going to involve maintaining branches as we know them, but as they die away, the banks will offer new alternatives on the high street.

“The closure of bank branches is a vicious circle. The more that close, the more people move online, so there are fewer people relying on high street branches, so more of them close.

“The pandemic picked up the pace around this ever-decreasing circle, closing more branches temporarily and causing online banking to spike.

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“The low interest rate environment that we’ll need to recover from the pandemic will make matters even worse, because banks find it harder to make money, and so they’re looking to cut costs by closing more branches.

“Today, the FCA and the banks have issued statements pledging to make sure people will still be able to access cash in future.

“We know the regulator won’t insist branches simply stay open, because it has chosen to issue guidance putting the ball in the banks’ court – saying they need to help their customers move online or make sure there’s a local alternative.

“They’re experimenting with what these alternatives will look like. Banks are trialling shared branches, with counter services run by the Post Office, self-service deposit points, and meeting rooms that the banks will take it in turns to use.

“They’re also trialling cashback schemes in local shops and cash collection services.

“The end may well be nigh for the traditional bank network, but there will be life for banks on the high street even after the death of the branch network.”

Interest rates across the UK are dependent on the base rate set by the Bank of England, with the Central Bank keeping it at 0.1 percent on May 6.

The Bank of England committed to keep the base rate low in a bid to boost economic activity but over the last year or so, the central bank has hinted at the possibility of negative rates being introduced.

In August 2020, Andrew Bailey, the Governor of the Bank of England, was asked if he would consider negative rates on CNBC.

He responded with the following: “No, I can’t give you that because I would never give you a judgement on what monetary policy is going to be a year ahead before we get there. What I can tell you is that other analysts are essentially right, in the sense of saying it is in the toolbox.

“But, there is no plan at the moment to bring it out of the toolbox and put it to work.”

Additionally, the Bank of England wrote to retail banks to gauge their preparedness for the potential introduction of negative rates.





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