* Competition should trump regulation, lawmaker says
* Will consider recommendations on capital, payments (Adds further comments from UK Economic Secretary)
By Matt Scuffham
LONDON, June 24 (Reuters) - Britain's financial regulator istalking to 25 potential new banks as part of moves to increasecompetition within the sector, the country's economic secretarysaid on Tuesday.
Lawmakers and regulators are keen to see challengers appearto break the dominance of Britain's biggest four banks - LloydsBanking Group, Royal Bank of Scotland, Barclays and HSBC - which account for more thanthree-quarters of lending to individuals and small businesses.
"We are trying to make sure that it is much easier to set upa new bank and to grow market share. Reforms should be as muchabout competition as safety and stability," Andrea Leadsom, aConservative lawmaker and economic secretary to the Treasury,told a conference organised by the British Bankers' Association.
Leadsom said the government would consider proposals putforward by the BBA, an industry lobby group, in a reportpublished on Monday. These include levelling the playing fieldso that challenger banks do not need to hold more capitalagainst some loans than established rivals and making it cheaperfor newcomers to access the industry's payments system.
Leadsom said moves to promote competition should beprioritised over increased regulation of the industry.
"Competition should always trump regulation, not the otherway round," the former banker told the conference.
Leadsom also said Britain's new payments regulator wouldexamine the benefits and cost of introducing a system that wouldenable customers to switch banks without changing their accountnumbers.
(Reporting by Matt Scuffham; Editing by Steve Slater andKirstin Ridley)