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OFT examines barriers to entering lending market

The Office of Fair Trading is to look at how easy it is for new players to enter the lending market as it aims to boost competition in the banking sector.

The OFT has called for evidence from established providers, new entrants and potential new entrants on the barriers to setting up a retail bank.

It is also reviewing the obstacles to expanding and winding up lending operations. Evidence will be collected on issues such as how easy it is to obtain Financial Services Authority authorisation, the constraints that capital and liquidity requirements place on new banks, difficulties in building up branch networks and tackling customer inertia.

The OFT is also keen to hear from industry bodies and organisations representing consumers and small and medium-sized business owners.

Clive Maxwell, senior director for services at the OFT, says: “We are committed to encouraging competition in retail banking that bene-fits consumers through cheaper and better products or services.

“We have recently seen some new players get into the sector but we want to understand the hurdles to this or the expansion of smaller lenders.”

Two new lenders emerged on the scene last month. Mortgage Strategy was first to reveal that the team at Exact had launched a broker-facing lender called Precise Mortgages while Aldermore, another lender solely dealing with brokers, also recently launched.

There are several other lenders waiting in the wings including Metro Bank, which was granted a banking licence in March.

And Virgin Money and Tesco Bank have also signalled their intention to enter the mortgage market by the end of the year.

The findings of the OFT review will be published in the autumn.

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