By Huw Jones

LONDON (Reuters) -Britain’s banks will have to provide more detailed analysis to justify closing a branch, cutting opening hours or converting a free cash machine to pay-to-use, the Financial Conduct Authority proposed on Tuesday.

The UK parliament has become worried that vulnerable customers, particularly in rural areas, are finding it difficult to have access to a bank branch and to cash.

Contactless transactions and cards have overtaken cash as the most popular way to make a payment.

The Financial Conduct Authority (FCA) had already issued guidance in September 2020 to banks on how they should approach any branch closures but the watchdog said on Tuesday that some banks have “fallen short” of what they should be doing.

It is proposing a tougher version of the guidance to include partial branch closures, such as reduced hours and reduced services such as the removal of a counter.

“We know that in some cases firms make decisions to close branches that are still being used by significant numbers of customers,” the FCA said in a statement.

“We have also seen firms making decisions to remove facilities such as counter services from branches, or to permanently and significantly reduce the hours that branches are open.”

Some banks and building societies are not currently doing enough to properly understand the impact of these changes and to keep their customers informed, it said.

“Extending communications to other groups such as local charities and councils to understand the wider impact from changes to services, is also included in the proposals,” the FCA said.

Last month the UK finance ministry proposed legislation giving new powers to the FCA to protect ‘access to cash’ and ensure the continued availability of withdrawal and deposit facilities locally.

(Reporting by Huw Jones, Editing by Iain Withers and Susan Fenton)