FSA blocking would-be lenders from the market
Share
New entrants looking to lend in the UK have accused the Financial Services Authority of stopping them from getting ventures off the ground.
While chancellor Alistair Darling has told the House of Commons that greater banking competition is one of the government’s main economic objectives, prospective providers have told Mortgage Strategy that the FSA is refusing to play ball.
A senior figure at one would-be lender, who wishes to remain anonymous, says: “The FSA is making it difficult for prospective lenders to enter the market. It is putting up an increasing number of obstacles - some justifiable, some less so.”
Mortgage Strategy understands that obstacles to entering the market include the FSA’s refusal to grant the banking licences firms need if they want to enter the mortgage lending sector.
But an FSA spokeswoman says: “The application pro-cess takes an average of six to 12 months from submission to approval. Precisely how long it takes depends on when we receive all the relevant information from applicant firms.”
Industry consultant Mehr-dad Yousefi says capital adequacy and liquidity proposals being mooted by the FSA mean prospective lenders will have to meet stringent criteria to be awarded full bank- ing licences.
Yousefi says that if these rules are implemented any new or existing lending institution would have to hold at least 30% of its assets in cash or liquid funds such as gilts before it could qualify.
He adds: “When the FSA looks at an application for a banking licence it will take into account whether or not the firm has enough capital to meet its regulatory requirements.”
Yousefi says that the candidates most likely to purchase assets from the Royal Bank of Scotland and Lloyds Banking Group are foreign banks and established British brands such as Tesco Bank and Virgin Money.
It was announced last week that RBS and Lloyds group will have to offload at least 918 branches between them as well as divesting significant assets to comply with European Commission state aid rules.
The FSA says fewer than 10 firms this year have applied for the licences that allow them to become deposit-takers and adds that four have withdrawn applications.
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
