UPDATE 3-Charter Savings to become third new UK bank since rule change

* Bank to launch in March

* Will offer online, telephone services but no branches

* CEO says bank will offer better savings rates

* BoE minutes show officials wanted fewer lenders (Adds CEO comments)

By Matt Scuffham

LONDON, Jan 7 (Reuters) - British startup lender CharterSavings Bank was cleared on Wednesday to start taking depositsas authorities try to encourage the formation of new banks totake on the dominant "big four".

The award of a banking licence to Charter Savings comesafter Britain last year made it easier for new banks to launch,cutting the length of time it takes to apply for a licence andlowering the amount of capital new banks must hold.

The new bank's parent company Charter Court FinancialServices, was founded in 2008 and is majority-owned by U.S.hedge fund Elliott Associates. The Wolverhampton-based businessemploys 250 staff and will run Charter Savings Bank alongsideits Exact and Precise mortgage brands.

Chief Executive Ian Lonergan told Reuters that the bank,which will save on start-up costs by not having branches, plansto take customers from bigger rivals by offering better rates.Many British savers have become disillusioned by the savingsrates offered by established financial services firms.

The bank will begin offering products including fixed ratebonds and savings accounts from March.

"They will be pretty simple savings products but with verycompetitive rates. The incumbents don't offer such great ratesand our research tells us customers are prepared to move tochallenger banks," he said.

Lawmakers and regulators are keen to see challengers appearto break the grip of Lloyds Banking Group, Royal Bankof Scotland, Barclays and HSBC --which account for more than three-quarters of lending toindividuals and small businesses.

Some lawmakers say a lack of competition contributed to thefinancial crisis of 2007 to 2009 and subsequent scandals.

Britain's Financial Conduct Authority was last year handed anew remit to promote competition within banking. Andrea Leadsom,a UK minister with responsibility for financial services policy,said moves to promote competition should take priority overincreased regulation of the industry.

The appetite for new banks contrasts sharply with theattitude of regulators during the financial crisis. Minutes frommeetings of Bank of England officials during the crisis whichwere published for the first time on Wednesday showed regulatorshad wanted fewer home loan providers.

"Arguably there was an economic need for rationalisation inthe number of mortgage lenders -- the Bank should not be seen tobe seeking to preserve the existing number of players in thismarket," the minutes say.

Charter Savings has become the third new bank to be granteda licence since the new rules were introduced, following Paragon and Scoban.

($1 = 0.6605 pounds) (Editing by David Holmes and Jason Neely)