The Bank of England has outlined how it will use “new powers” to preserve wholesale cash distribution.

The central bank said that cash plays an important contingency role if other forms of payment are unavailable or interrupted, while also remaining vital for many people in society.

It warned that the declining use of cash is putting pressure on the wholesale distribution system, which directly underpins access to cash for the retail market.

The existing system was designed for a society with higher cash usage, with cash processing volumes in the UK having fallen by nearly half in the past six years.

Waning cash volumes have lead to inefficiencies that are putting the UK cash infrastructure under pressure, creating risks of disruption to consumers and businesses who need access to cash, said the bank.

Earlier this year, the government announced its intention to give the central bank new powers to ensure the "future effectiveness, resilience, and sustainability of the wholesale cash infrastructure."

The bank, which has launched a consultation on its supervisory approach to wholesale cash distribution, says that its new powers come under the Financial Services and Markets Bill, which is currently before parliament.

“Today we are setting out how we plan to use new powers given to us by Parliament to ensure wholesale cash distribution remains effective, resilient and sustainable into the future," said the Bank of England's chief cashier Sarah John. "This will help underpin continued retail access to cash for business and individuals in the UK for years to come."

The move comes days after the Post Office announced that cash withdrawals had reached record highs in November, as people look to budget during the cost-of-living crisis.

The consultation, which is setting out how the bank intends to use its new powers to maintain cash access, said that its proposals will cover: its approach to wholesale cash distribution oversight; principles for the wholesale cash distribution market oversight regime; high-level codes of practice for participating members; and fees required to fund the Bank’s supervisory activity.

The bank added that should a systemic entity emerge in the wholesale cash distribution market, it will be subject to a prudential supervisory regime because it could pose risks to financial stability.

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