View more on these topics

Tyrie calls for post-Brexit reforms to capital rules for new banks

Andrew Tyrie Tory conf 2013.jpg

The chairman of the Treasury Select Committee has called for the Government to seize the opportunity to ensure that post-Brexit capital rules are fairer on challenger banks.

Conservative MP Andrew Tyrie says that Brexit offers the chance to reshape regulation in a way that gives small and new lenders a better chance of success.

His comments come in response to a letter from Aldermore, Metro Bank, Secure Trust Bank, Shawbrook, OneSavings Bank, Hampden & Co Bankers and Charter Savings Bank following the EU referendum result, arguing that they should be subject to less onerous capital rules.

Tyrie says: “Brexit poses risks; it may also create opportunities. Current EU legislation could be placing smaller banks at a disadvantage. This is because it risks imposing a ‘one size fits all’ approach to banking regulation.

The Bank of England and the Government both now need to consider whether the opportunity afforded by Brexit could enable the development of a regulatory regime less prejudicial to small and challenger banks.”

Challenger banks have long argued that they unfairly face steeper capital requirements than larger lenders, in part because they do not have enough capacity or resources to use the so-called internal ratings-based (IRB) approach to calculating credit risk, the committee says.

Andrew Baile, former chief executive of the Prudential Regulation Authority, had previously written to Tyrie highlighting the challenges associated with the EU’s new capital regime, saying “there are limitations to the discretion the PRA currently has.”

He said that, in its response to the EU, the UK regulator had argued against the ‘one-size-fits-all’ approach, which he said “can cause distortions given that the costs of regulation tend to bear more heavily on smaller banks.”  Before the referendum result Bailey had promsed he would work closely with the EU to achieve a fairer system.

Tyrie warned that the stakes were high, stressing: “Millions of consumers and small businesses have been getting a poor deal for decades because of inadequate competition and choice in banking. They will continue to do so, unless the PRA and the FCA supported, where necessary, by the Government, do whatever is required to reduce barriers to entry in the banking market to a reasonable level.”

This week, in his appointment hearing with the Committee (10:12), Sam Woods, Bailey’s successor as deputy governor for prudential regulation and head of the PRA, admitted that, with some qualification, “there is a genuine issue here”, and agreed with Tyrie’s request to “keep it high on his agenda in his new job”.

Recommended

Trash Talk: ‘Out-passioning’

Mortgage Monkey reveals the gibberish littering the industry’s press communications Business speak of the week: ‘Out-passioning’ Culprit: Cubitt & West estate agency Mortgage Monkey realises times are tough for estate agents. Post-Brexit vote anxiety may be giving many buyers cold feet and agents are having to up the ante to generate their normal monthly commission. […]

Scotland-Scottish-Flag-700.jpg

Scottish brokers most positive about B2L future: L&G

Brokers in Scotland are the most confident about buy-to-let’s future, according to Legal & General. L&G research shows that 63 per cent of Scottish brokers think the 2016 buy-to-let market will remain the same size as last year, despite the 2015 surge in activity. Just 49 per cent of mortgage advisers in London were as […]

Reforming India: just the beginning

By Kunal Desai, Neptune India Fund

As global investors continue to scour emerging markets through the lens of reform potential, India shines bright. Indeed, we think it can sparkle even brighter. We anticipate India’s self-imposed 10-year ‘policy holiday’ to turn into one of the most pro-growth and pro-investment policy calendars seen in Asia in years. The Indian electorate has engineered a historic verdict. We now have the strongest Indian government since 1984, with the pro-market Bharatiya Janata Party (BJP) achieving an absolute majority for the first time in the party’s history.

Newsletter

News and expert analysis straight to your inbox

Sign up