OFT to review barriers to new banking entrants

26 May 2010 0:00 am | Updated: 26 May 2010 10:21 am | By Leah Milner

The review will look at obstacles that are holding back new entrants and preventing smaller banks from expanding.

 

The review will focus on:

• Regulatory requirements, including obtaining authorisation from the FSA and capital and liquidity requirements.
• Access to payment systems and availability of credit risk information.
• Barriers to achieving scale such as developing branch networks and customer inertia.
• Barriers to exit and aspects of the operation of the Special Resolution Regime.

The OFT says the extent of any barriers to entry, expansion and exit in retail banking will affect how the market now develops.

It says that where new entry and expansion occurs quickly and efficiently, it is more likely that banks which fail to meet their customers’ needs will lose market share in favour of those that can.

The OFT is particularly interested in hearing from established providers, new entrants and potential new entrants to the sector, industry associations and organisations representing consumers and SME customers.

Senior director for services Clive Maxwell says: “The OFT is committed to encouraging competition within retail banking that benefits consumers through cheaper and better products or services.

“We have recently seen some new players enter retail banking and we want to understand whether there are any hurdles to this or to the expansion of smaller banks.”

The call for evidence will run until July 8 and findings from the review are due to be published by the autumn of this year.

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