View more on these topics

New banks regulations are a ‘game changer’

The FSA and the Bank of England have outlined a series of regulatory changes designed to make it easier for new banks to set up in the UK.

The changes, which came into effect today, have been the result of a review into the banking sector looking at the barriers new entrants face. The FSA – now the FCA – and BoE say the measures will ease the pressures on start-up banks, whose applications will now only take six months to assess.

Liberal Democrat peer Baroness Kramer, who is a former vice-president of Citibank in Chicago and an ex-MP, said the changes are a “game changer”.

She says: “For 100 years the regulator has rejected almost every new bank, leaving us with a banking system dominated by just four institutions, many of whom have abused that power by failing to serve the customer.”

In terms of the prudential regime, start-up banks will be subject to reduced liquidity and capital buffer requirements. The additional capital requirements, known as add-ons and scalars, which were previously applied to new entrants to reflect uncertainty are being scrapped.

Start-up banks will be required to hold a 4.5 per cent minimum Core Tier 1 capital requirements rather than the 7 per cent to 9.5 per cent requirement asked of existing banks.

All new banks will benefit from a recent reduction in liquidity requirements and there will no longer be an automatic new bank liquidity premium.

FSA chairman Adair Turner says: “We believe the changes will make a significant difference to the ease with which new firms can enter the UK banking system and, as a result, enable an increased competitive challenge to existing banks.”

Metro Bank founder and chairman Vernon Hill, whose bank was the first to gain authorisation in 100 years when it launched in 2010,says: “New entrants seek clarity of the approval process, proportionality and fairness of capital and liquidity requirements. The new FSA policy is a major improvement.”

Recommended

Prudential 480

Pru considers UK private rental sector

The Prudential is set to close a deal with the Berkeley Group for more than 500 houses, making it the first institutional investor to enter the private rental sector in recent times.

Montlake Andrew MS blog 150

Marketwatch

We should start by saying a big hello – “Hello” – to the Financial Conduct Authority, and goodbye, farewell, auf weidersein, adieu to the dear old FSA. We have had some laughs, some good times, more than a few tears, a couple of scandals and the odd falling out but time moves on. There have […]

Guide cover

Guide: Johnson Fleming produces auto-enrolment checklist

For a job as big as managing the auto-enrolment changes, it’s important to know what has been completed and what still lies in front of you to give you the reassurance that everything is in hand. Getting the planning and project management right at the outset can help you see the path ahead and ensure everyone knows their roles and responsibilities. To help with this, Johnson Fleming has produced a checklist outlining every step that needs to be taken when preparing for auto-enrolment.

Newsletter

News and expert analysis straight to your inbox

Sign up