View more on these topics

Regulation could hit challenger bank growth: KPMG

FCA logo glass 2 620x430
Challenger banks’ growth could be hamstrung by disproportionate regulatory pressure, according to a new KPMG report.

The report, written by Warren Mead, says regulation tends to favour larger banks over smaller challengers.

It says: “A potential inhibitor to challenger growth is a regulatory regime that in some respects tends to favour incumbent banks over the emerging challengers.

“This is particularly true with regard to the regulatory capital regime. In theory the rules apply equally to all banks, in praxis however, they don’t.

“Challengers have to hold more capital in comparison to the big banks. The reason for this is perceived risk. By definition, a challenger is new to the market and consequently lacks the trading record and evidential data that an incumbent can offer the regulator.”

This leads to challenger banks being seen as risky and getting a higher risk rating and a larger capital requirement as a result, according to KPMG.

For challengers to thrive in the mass market, regulation must change, says KPMG.
It says: “To attain the ‘advanced’ model rather than ‘standard’ designation requires access to data that few challengers have, as well as a huge commitment of time and money.

“That doesn’t mean they are riskier propositions. In fact, given their focus and simpler business models they may well be less risky.

“However, when the regulator applies the same tests across the board the new generation of institutions are placed at a disadvantage.”

KPMG says one solution is to apply the same regulatory standards to all banks but to allow challengers to give an average of the weightings that are applied to the major institutions.

Recommended

House-Home-Property-Ladder-Mortgage-700x450.jpg

Landlords step up legal challenge over buy-to-let tax

Buy-to-let investors are looking to raise a further £250,000 in their bid to fight the cuts to mortgage interest relief set to be phased in from next year. The Telegraph reports campaigners plan a summit in central London to add to the £50,000 already raised as part of plans to launch a judicial review against […]

Money-Notes-Currency-GBP-700.jpg

Challenger bank eyes RBS spin-off Williams & Glyn

Challenger bank Secure Trust is weighing up a bid for Royal Bank of Scotland arm Williams & Glyn, according to City AM. Santander and BBVA are also tipped to bid for Williams & Glyn, which has 300 UK branches. RBS must sell Williams & Glyn by the end of 2017 under the conditions of its […]

Challenger bank hires Colin Bell as it nears B2L and commercial launch

Former InterBay Commercial chief executive Colin Bell has joined Hampshire Trust Bank to spearhead its entry into the buy-to-let and commercial mortgage sectors. Bell left InterBay, which is OneSavings Bank’s commercial mortgages arm, in September and takes on the role of managing director of commercial mortgages at HTB. The lender has also appointed Anna Lewis, […]

Advice or guidance? That is the question

The Retail Distribution Review (RDR) brought many benefits to the UK pension industry, but it also created an advice gap, resulting in consumers with the smallest funds struggling to access advice at a suitable price By Justin Corliss, Business Development Manager The Financial Advice Market Review (FAMR) produced in March 2016 aims to remedy this, […]

Get your New Year off to a flying start

Ross Jackson, Senior Marketing Manager There’s no denying that these days we expect things quickly. You might have noticed it first-hand during the flurry and rush of the Christmas period. The fact is that in a world of smartphones, social media and click and collect, most clients expect to get an instant response and a […]

Newsletter

News and expert analysis straight to your inbox

Sign up