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Lawyer disputes OFT bank account

A City law firm has questioned the Office of Fair Trading’s claims that regulatory requirements are not a barrier to entry for new players in the banking sector.

The OFT launched a review in May to identify obstacles to entry or competition against existing firms and barriers to exit for those who operate inefficiently.

In its findings, published last week, the OFT concluded that most prospective entrants are able to meet regulatory requirements and source the necessary inputs to offer retail banking services.

But CMS Cameron McKenna partner Paul Edmondson says the consumer and competition authority is being “optimistic” in its assessment.

He says: “Frankly, the OFT is being over-optimistic if it thinks there are no regulatory barriers to new entrants into the banking sector.

“New banks will have to satisfy the potentially competing criteria of the twin peaks’ PRA and CPMA regime – a daunting prospect for any new business.”

The report also found that the reluctance of personal and small business customers to switch providers, their loyalty to established brands and their preference for banks with a local branch present potential barriers to new providers hoping to expand their market share.

A copy of the 243-page review will be submitted to the Independent Commission on Banking, set up by Government to examine issues of competition and stability in the banking market.

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