View more on these topics

FSA and BoE relax the barriers to entry for new banks

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.

Lord Adair Turner 480

The changes have been the result of a review into the banking sector looking at the barriers new entrants face.

Liberal Democrat peer Baroness Kramer, who is a former vice-president of Citibank in Chicago and an ex-MP, said today’s 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.”

Both regulators have today set out changes to regulatory requirements and the authorisation processes which it says will ease the pressures on start-up banks.

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: “This has been a comprehensive review and we have made some bold changes, ones that respond to the difficulties faced by applicant firms. 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.”

In terms of the authorisation process, start-ups which have completed the application will have the assessment by the Prudential Regulatory Authority and Financial Conduct Authority completed within six months.

Significant levels of up-front support will also be provided during the pre-application stage.

Applicants which are unable to meet the six-month timetable for the authorisation process, either because they cannot fund the up-front investment required or due to longer lead times for raising capital, will have access to an alternative route.

This three-stage route to authorisation will offer the same pre-application support but with a shorter application which focuses on essential elements. The FCA recognises business case, capital, liquidity, and key senior appointments as essential elements.

The authorisation granted will come with a restriction that will enable the firm to then mobilise the remaining requirements such as capital, personnel, IT and other infrastructure.

The changes which have not yet been implemented will come into effect from 1 April when the PRA and the FCA both come into existence.



60 Seconds with… Jon King, managing director of More 2 Life

Last year More 2 Life launched its Interest Choice Plan to help retirees on interest-only mortgages – what has the take up been? The take up has been excellent which comes as no surprise given the potential size of the market with around 103,000 retired households still paying mortgages. We designed the product following feedback […]

Gary Little MS blog

Insurance cheats are playing with fire

The University of Portsmouth recently issued a study identifying individuals who are most likely to defraud their household insurer. The findings make for some interesting reading. The report analyses about 40,000 claims handled by VFM Services, a fraud investigation service. The study reveals that the typical household fraudster is equally likely to be male or […]


Diversify to accumulate

More and more brokers are beginning to see the value in building a general insurance business for themselves. However, many, though willing, are unsure as to how to begin. The simplest and most obvious starting point is your current customers. Most people like to get all their products in one place – hence why supermarkets […]


Chancellor to launch £130bn MIG scheme under Help to Buy banner

Chancellor George Osborne last week announced a package of measures that could encourage tens of billions in extra mortgage lending. The measures, known collectively as Help to Buy, build upon the Government’s existing mortgage indemnity and shared equity schemes, NewBuy and FirstBuy. Osborne announced the creation of a new £130bn MIG scheme which, unlike NewBuy […]


News and expert analysis straight to your inbox

Sign up