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By Huw Jones
LONDON, July 16 (Reuters) - The British government said onThursday it would step up efforts to boost competition inbanking and rejected criticism that its tax changes would leavethe sector worse off.
The government surprised banks earlier this month byannouncing a new 8 percent surcharge on profits from January,sending shares in new banks like Aldemore, Virgin Money and Shawbrook tumbling.
A levy on the balance sheets of large banks like HSBC would, however, be slashed and the basic corporate taxrate for all lenders cut as well.
The British Bankers' Association (BBA) has said thesurcharge will hinder new entrants and contradict thegovernment's policy of seeking stronger competition.
But Harriett Baldwin, Britain's financial services minister,said the tax and levy changes set out a "sustainable, fair andcompetitive long-term plan" for the sector.
"These changes will leave all our banks, includingchallenger banks and building societies, with a rate ofcorporation tax lower than in every other G7 country," Baldwintold a CityUK lobby group event.
She said it was important to keep encouraging new banks toenter the market, and Britain's two financial regulators, thePrudential Regulation Authority and the Financial ConductAuthority, will set up a "new bank unit".
The unit would help new, prospective banks to enter themarket and support them through the early days of fullauthorisation, she said.
The FCA and UK Treasury declined to elaborate, saying moredetails would be announced later in the year.
Regulators have already speeded up authorisation of newbanks and their CEOs, and eased initial capital requirements,with 14 new lenders authorised in the past two years and another20 in the pipeline.
After setting out a long-term tax plan for banks, the sectorcan now move to a "new level" by focusing on becoming morecompetitive, helped by the decision to make this a new remit forregulators, Baldwin said.
The cut in bank levy comes after HSBC, which pays a largechunk of it, said it was reviewing whether to keep its headoffice in London. (Reporting by Huw Jones; Editing by Mark Trevelyan)
