LONDON (Reuters) - Britain’s regulators have given the green light to five new banks since easing rules a year ago for new entrants to challenge the handful of lenders who dominate the high street.
The Bank of England and the Financial Conduct Authority also said on Monday that a further more than 25 potential banking applicants have been interviewed as regulators face pressure from lawmakers to increase competition in banking.
Opposition Labour Party leader Ed Miliband has said he will consider limiting the market share of big banks should his party come to power in next year’s election as scandals at top banks spark calls for more competition.
Just five banks - HSBC (HSBA.L), Royal Bank of Scotland (RBS.L), Barclays (BARC.L), Lloyds (LLOY.L) and Santander UK (SAN.MC) - still account for more than three-quarters of lending despite several challengers entering the market in recent years.
The five new banks that have just been authorised are: Axis Bank, Union Bank of India, FCMB, UBA Capital, and Paragon Bank. They join other recently-launched names like TSB, spun off from Lloyds last month and emerging as a credible challenger with 4.5 million customers, as well as Virgin Money and retailer Tesco (TSCO.L), Aldermore and Shawbrook.
Back in 2010 Metro Bank became the first new lender to emerge for over a century, highlighting in difficulty of launching a new bank.
Regulators have since made it easier for new banks to get off the ground, relaxing some rules in March 2013, while insisting basic safeguards remain in place, such as protections on customer deposits.
A new bank now only needs a million pounds in capital compared with the previous minimum of five million pounds. Authorisation of top officials has also been fast tracked.
“It is clear that the changes introduced last year have been positive for new entrants and will make a contribution to increasing competition and thus benefit customers,” Andrew Bailey, chief executive of the BoE’s Prudential Regulation Authority, said in a statement.
In the latest pre-application meetings, regulators met more than 25 more potential lenders, ranging from retail to wholesale banking and payment services firms.
“In any sector newcomers to the market bring fresh thinking, and challenge established firms to consider how they can offer a better deal or improve the service they offer,” said Martin Wheatley, chief executive of the Financial Conduct Authority.
Regulators do not plan to introduce any further measures to lighten requirements for entry to the banking sector.
Andrea Leadsom, a junior UK chancellor, said regulators are meeting the challenge set by government to increase competition in banking.
“Critical to our long term economic plan is getting new banks into the marketplace, and today’s report shows we are doing that. This is good for customers and good for the banking industry,” Leadsom said in a statement.
Separate steps to increase competition have been introduced, however, such as making it easier and free to move a bank account - though switching rates are still low - and the setting up of a new regulator to oversee bank payments systems, to ensure fair access for new banks who typically have to use the payment systems set up by the big lenders.
Reporting by Huw Jones; Editing by Sophie Walker