The banking system in this country is in the process of reform, but last week the FCA’s Martin Wheately outlined a problem: people are more likely to divorce than move their accounts, and they put up with worse treatment at banks than in any other industry.
This is an issue the FSA has been nosing around for a while, but this week they’re expected to announce plans to make things a little easier for new banking rivals to the big four – HSBC, Loyds Banking Group, HSBC and Barclays – by relaxing capital and liquidity rules.
New banks, for their first three years, will now be able to hold half the amount of emergency capital as the larger ones, and will have lower liquidity requirements. It will also be easier for start-ups to get a banking licence – the waiting time will be cut from a year to 6 months.
These smaller banks – like Metro Bank, Aldermore and Secure Trust – are the “challengers” mentioned in the Budget – the banks for which the Treasury said it would make a “significant difference to the ease with which [they] can enter the UK banking system”.
The rules will also benefit those buying the branches being sold off by RBS, (which it is doing to comply with the terms of the £40 bn bailout it received in 2008).
Are the big four worried? The Guardian report suggests they’ve got bigger fish to fry:
Existing banks, however, are more focused on the assessments that have been made of their capital positions. The concerns are focused on three main areas: the way that banks are offering leniency to customers in arrears (forbearance); the impact of more regulatory fines and compensation from mis-selling scandals; and the way international capital rules allow them to set aside asset capital against the risk of the loans they hold.
The Bank of England has put an estimate on the three areas of up to £15bn, £10bn and £35bn respectively – a total of £60bn – although at the lowest end the estimate is closer to £25bn.