The City regulator will be given new powers over the UK’s biggest banks and building societies to help protect the future of cash.

Banks will be subject to Financial Conduct Authority (FCA) powers to ensure communities have cash withdrawal and deposit facilities.

Measures will be legislated for in the Financial Services and Markets Bill, helping to ensure financial inclusion, the UK Government said.

The FCA’s new powers will allow it to address cash access issues at both a national and local level.

To support the FCA, the Government said it will in due course set out its expectations for a reasonable distance for people to travel when depositing and withdrawing cash.

This will reflect the existing spread of cash withdrawal and deposit facilities in the UK, it added.

Around 5.4 million adults rely on cash to a very great or great extent in their daily lives.

But fears over “cash deserts” potentially being created have grown in recent years, particularly in deprived and rural areas, as bank branches shut or reduce their opening hours.

Physical money can often help people with budgeting.

As people try to manage on tighter budgets amid surging living costs, communities are seeing their access to cash dwindle, Which? recently said, with more than 4,000 bank branches closing since 2015 and more than 12,000 free-to-use ATMs vanishing since 2018.

Economic Secretary John Glen, who was visiting Scotland on Thursday, said: “Millions of people across the UK still rely on cash, particularly those in vulnerable groups, and today we are delivering on our promise to ensure that access to cash is protected in communities across the country.

“I want to make sure that people are still able to use cash as part of their daily lives, and it’s crucial to ensure that no person nor community across the UK is left behind as we embrace a more digital world.”

The Government has previously said that the Payment Systems Regulator will be able to require banks to reimburse authorised push payment (APP) scam losses under measures in the Financial Services and Markets Bill.

APP scams happen when someone is tricked into transferring money to a fraudster.

Legislation was previously passed to enable the widespread adoption of cashback without a purchase as part of the Financial Services Act 2021.

The Government also recently announced its intention to legislate to provide the Bank of England with the powers necessary to ensure the UK’s wholesale cash infrastructure, including the network of cash centres, remains effective, resilient, and sustainable.

John Howells, chief executive of ATM network Link, said: “We are pleased that the FCA will have oversight and we look forward to seeing the consultation response in greater detail.”

Natalie Ceeney, chair of the Access to Cash Review and Cash Action Group, said: “What’s important is that a lot of work has gone into this over the past few years and I’m pleased that parties of all colours recognise the importance of access to cash.

“It’s vital that we all work together to get the best outcome for consumers and small businesses.”

Martin Kearsley, Post Office banking director, said: “A powerful regulator ensuring the rights of millions of people who rely on cash can access it conveniently and securely for many years to come is something that we and many others have called for.

“We welcome the Government’s announcement and want to see legislation that protects the full cash cycle, including cash withdrawals to the penny, as many more people choose to control their household budgets by spending only what they physically have in their hands.”

Rocio Concha, Which? director of policy and advocacy, said: “Cash remains a vital lifeline for millions of people – whether to pay for everyday essentials or to help keep track of spending amid the soaring cost of living, so it’s good to see the government taking action and giving the FCA powers to protect them.

“The sheer scale of cuts to the UK’s ATM and bank branch networks in recent years has seriously eroded access to cash for consumers and communities around the country.

“The Treasury’s proposal to base reasonable access to cash on geographical distances is a decent starting point, but this can often be a blunt tool, so the FCA must fully consider a wide range of factors when determining a local community’s access to cash needs.”