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LONDON (Alliance News) - Public sector bodies should be encouraged to invest funds in the UK's smaller, emerging banks to help them compete with their large, dominant high street rivals, the UK banking industry's main association said Tuesday.
In a report on competition in banking, the British Bankers' Association called on ministers and regulators to implement a package of measures to support competition in an industry which has been criticised for the dominance of Lloyds Banking Group PLC, Barclays PLC, HSBC Holdings PLC, Royal Bank of Scotland Group PLC and Spain's Banco Santander SA.
The BBA urged local authorities and governments to play their part, stating that they do not currently make deposits in so-called challenger banks.
It also said that the levels of capital that need to be held by challengers should be less onerous. New entrants to the banking system are forced to hold more capital against loans than the traditional high street banks as protection against potential losses. The BBA said that regulators need to be more proportional in their approach to challengers, and said they shouldn't be obliged to meet the standards imposed on their larger rivals for every regulation.
BBA Strategy Director James Barty said that customers are the biggest winners from competition, indicated that banking has lessons to learn from new airlines and supermarkets, which he thinks have increased the variety of goods and services offered to millions of customers.
"Customers are the biggest winners from competition. You just have to look at how easyJet, Ocado and Lidl have shaken up their industries by providing new goods, services and price structures," Barty said in a statement.
"The banking industry is made up of a number of different markets, each with its own range of providers striving to win customers every day. Many of these markets are already extremely competitive but we want ministers and regulators to make it easier for emerging banks to set up and grow," Barty said.
"The best way to promote competition is by creating a more level playing field for players of all shapes and size. It?s vital that we don't treat all banking markets as the same and introduce rules, regulations and costs that smother changes that are already driving competition," Barty added.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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