By Charlie Conchie
A “one-size-fits-all” approach to regulating UK lenders has failed and watchdogs need to “break the chains” holding back the growth of challenger banks, a group of MPs said today.
In a new report on the UK’s banking sector, the all party parliamentary group on challenger banks and building societies argued that the UK’s upstart lenders had a key role to play in ‘levelling up’ the UK but were being bogged down by over-burdensome rules.
“The UK’s one-size-fits-all regulatory model for banks – challengers, building societies and institutions big and small isn’t working,” said Conservative MP Karen Bradley, chair of the cross-party group.
“This is not being caused by the day-today realities of the UK economy or recent events such as COVID but a deeper structural malaise.”
Among a host of recommendations in the report, the group said ministers must leverage the new financial services and markets bill to scrap prescriptive rules in the sector and unleash a “new big bang”.
Loosening capital rules for banks in so-called levelling up regions should also be near the top of the list for regulators, the group said, with the current framework acting as “regulatory chains” that prevented lenders being founded in underdeveloped areas.
“Time and again, when it comes to the regulation of challenger banks and building societies, there seems to be a distinct lack of proportionality in the approach of regulators,” the group said.
“It is almost as if the UK’s regulatory authorities would prefer to deal with a few behemoths rather than a competitive panoply of diverse institutions.”
The report comes as ministers look to breathe new life into the UK’s financial services with the financial services and markets bill, which government is hoping to use to scrap EU-era rules and overhaul the regulatory framework governing UK financial services.
Regulators will also be granted fresh powers to “enhance the transparency and effective function of markets”, the government said in July.
In a statement today, boss of Metro Bank Dan Frumkin, which funded the APPG report, said the potential of challenger banks “continues to be held back because rules and regulations aimed at de-risking the UK’s biggest banks actually prevent challengers from growing and shaking up banking for the better”.
“I hope that this report kick-starts debate on improving these rules and opening the path to growth,” he added.
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