Retail banking may get Brexit boost, challenger banks say

31 January 2017 9:55am

21 July 2016. By Lewis Crofts.

Leaving the EU could give the UK the space to scale back banking legislation and inject competition into the market, seven new retail banks have said.

A “more proportionate approach” to regulating capital could help smaller banks and building societies challenge the dominant incumbents, the banks say in a letter to the UK parliament’s committee overseeing banking regulation.

The letter is signed by Charter Savings Bank, Aldermore Bank, Hampden and Co, Metro Bank, Secure Trust Bank, OneSavings Bank and Shawbrook Bank.

The UK’s banking market has come under repeated scrutiny from lawmakers and competition authorities, concerned that consumers are tied into major household-name banks such as Lloyds and Royal Bank of Scotland.

In the June 30 letter to the Treasury committee, published today, the seven retail lenders say the decision to leave the EU gives the UK government the chance to “determine its own strategy for the regulation of banks.”

They urge the lawmakers to impress upon the UK’s “timid” competition authority the need to help the challenger banks.

They take aim at capital rules that require smaller banks to hold more capital to undertake the same lending as a larger bank. They also called for the major banks to share data with them.

Furthermore, the banks are seeking to address imbalances in the taxation and funding regimes.

Andrew Tyrie, the lawmaker heading the parliamentary committee, said in a statement: “Brexit poses risks; it may also create opportunities.”

“Current EU legislation could be placing smaller banks at a disadvantage. This is because it risks imposing a ‘one size fits all’ approach to banking regulation.”

“The Bank of England and the government both now need to consider whether the opportunity afforded by Brexit could enable the development of a regulatory regime less prejudicial to small and challenger banks,” Tyrie said.

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