UPDATE 2-British banks told to pause branch closures

(Adds HSBC comment)

LONDON, Jan 28 (Reuters) - Britain’s financial watchdog on Thursday told banks to rethink planned branch closures during the coronavirus lockdown in a warning to lenders seeking drastic cuts to patch up pandemic-dented finances.

The Financial Conduct Authority (FCA) said banks should consider the impact of national pandemic restrictions on their ability to comply with regulatory guidance on branch closures, including consulting customers affected.

Last September’s FCA guidance on branch and cash machine closures sets out how banks should assess customer and business needs by considering what alternatives are available.

“Some banks and building societies have informed us that they are either going ahead with branch closures already announced, or announcing new branch closures during the current lockdown,” the FCA said in a statement.

“We are concerned that these activities could have significant consequences for customers. It may be harder than usual to reach all customers under the current restrictions and engage with them on closure proposals effectively.”

HSBC this month announced plans to axe 82 branches in Britain after a drop in footfall and a surge in digital banking, though it said the trends predated the COVID-19 pandemic.

HSBC on Thursday said it was mindful of the impact that branch closures have on people and communities and does not take such decisions lightly.

“Our first branch closures are planned for April 23rd but, like we did last year with our branch closures, we will keep the timings of these under review and amend them as necessary,” HSBC said.

Several banks paused branch closures in the early months of the pandemic before resuming cutbacks. In the second half of 2020 Britain’s biggest domestic lender, Lloyds, resumed plans to cut 56 branches. Sabadell’s TSB, meanwhile, announced it was axeing 164 branches.

“We want firms to review their plans against our existing guidance and ensure that they continue to comply with our principles,” the FCA said.

“Where firms consider it is appropriate to continue with plans during this period, we expect them to have considered our guidance and be able to demonstrate how they’ve taken the concerns and expectations set out in this statement into account.”

Reporting by Huw Jones and Iain Withers Editing by David Goodman