Bank of England aims to boost competition in lending

By Huw Jones

LONDON, Oct 24 (Reuters) - The Bank of England is proposing
cuts to capital requirements for credit unions as part of
efforts to remove barriers to stronger competition in lending,
Deputy Governor Sam Woods said on Thursday.

Woods added that Britain's departure from the European Union
would give UK regulators more room to simplify financial rules.

He said that while prior reforms have led to many new banks
being created, none of the new lenders has grown big enough to
take on HSBC, Barclays, Lloyds or Royal Bank of Scotland, the
"Big Four" that dominate Britain's high streets.

After tackling barriers to entry for challenger banks, it
was time to tackle the barriers to growth, said Woods, who is
also chief executive of the Bank's Prudential Regulation
Authority (PRA), which regulates lenders.

Woods said the PRA had mapped out the barriers using a
machine to sift through data and rules via text-search, with
results cross-checked by humans, before taking a fresh look at
capital requirements for credit unions.

Credit unions are member-owned, non-profit co-operatives
that offer loans and savings products to members who are often
less well off.

The sector is tiny but helps those who find it hard to open
a bank account and might otherwise turn to loan sharks or other
types of high cost loans.

The PRA is launching a public consultation on proposals to
simplify capital requirements for credit unions, Woods said.

"The effect of these changes should be to reduce overall
capital requirements for the credit union sector by roughly one
quarter," Woods said in his annual speech to the City of London
financial district.

There are over 400 credit unions in Britain with a total of
2 million members. Loans passed 1.5 billion pounds for the first
time in 2018 when total assets rose to 3.3 billion pounds,
according to BoE data.

Turning to banks, Woods said the current main threshold of
50 billion pounds or above in assets for banks having to meet
the bulk of capital and other requirements "feels about right",
Woods said.

He was seeking views of lenders on over 50 different
thresholds for capital, reporting and remuneration, with 33 of
them imposed by the BoE itself rather than under EU or global
rules.

"Should we rationalise and harmonise any of these
thresholds? We are now looking at that question and have an open
mind on it."

The machine-search also highlighted the complexity of rules
that stretch longer than the Bible's Old Testament or Tolstoy's
novel War and Peace.

"Small firms tell us that complexity is a real challenge and
my instinct is that a simpler -- simpler, not weaker -- regime
for small firms could benefit both our safety and soundness and
competition objectives," Woods said.

"This is an area where we may have more room to manoeuvre
following Brexit."
(Reporting by Huw Jones; Editing by Catherine Evans)