The British Bankers’ Association has called for capital requirements to be relaxed for challenger banks as part of a raft of measures to boost competition.
The Daily Telegraph reports the trade body has set out proposals aimed at “disrupting” the banking market in the same way the airline and supermarket sectors have been shaken up by new entrants.
The BBA argues smaller, newer banks have to hold disproportionately more capital than larger players as they have not built up the sophisticated models to assess risk that more established lenders have.
It says challenger banks should be able to use similar methods of weighting their capital to major banks.
The BBA also wants to see improved funding for challenger banks by encouraging public bodies to deposit money with them. It also recommends the Funding for Lending scheme be amended to make it easier for smaller banks to access finance.
The trade body has also called for regulators to factor in challenger banks when setting policy, perhaps by not imposing the same standards on smaller banks that major banks have to meet at certain times.
BBA director of strategy James Barty says: “We are saying we need to level the playing field.
“In the supermarket sector and airlines, those new entrants really disrupted the market. We think banking is on the cusp of the same thing happening.”