UPDATE 2-British banks told to pause branch closures

(Adds HSBC comment)

By Huw Jones and Iain Withers

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)