OFT to investigate obstacles for would-be lenders

The Office of Fair Trading is to review the barriers faced by new entrants wanting to enter the retail banking sector and for smaller banks looking to expand.

The OFT has published a paper today calling for evidence on the barriers for entry, expansion, and exiting the market for retail banks, and how these affect banking for personal customers and small and medium-sized enterprises.

It is looking for evidence on issues such as how easy it is to obtain authorisation from the Financial Services Authority, the constraints of capital and liquidity requirements, and the difficulties in developing branch networks.

The regulator also wants to collect more evidence on how difficult it is for banks to wind up and the requirements of the Special Resolution Regime.

The OFT says it would particularly like to hear from established providers, new entrants and potential new entrants to the sector, industry associations and organisations representing consumers and SME customers.

Clive Maxwell, senior director for services at the OFT, says: “The OFT is committed to encouraging competition within retail banking that benefits consumers through cheaper and better products or services.

“We have recently seen some new players enter retail banking and we want to understand whether there are any hurdles to this or to the expansion of smaller banks.”

The review covers the whole of the UK and will run until July 8. Findings are due to published in autumn.