The Office of Fair Trading is in discussions with the Government to help bring new players into the banking sector.
In its financial services plan, it says as a part of its remit to promote competition and fairness in the commercial finance market, it will encourage new businesses to enter the banking market.
It says: “We have already been in discussion with Government to provide advice on possible remedies that could be used to encourage entry into the banking market and facilitate switching of customers – two important mechanisms of ensuring the existence of competitive markets.”
John Charcol senior technical manager Ray Boulger says: “There is no question that new entrants to the market are important. The six active UK lenders are doing around the same levels of business that they did before the crunch, the problem is that all the other lenders have left the market.”
He says the resulting gap in the market creates a lot of opportunity for new lenders and adds: “In a flat market like this, 20 new institutions lending just £1bn each would make a huge difference.”
The OFT report also says that it will be monitoring any undue competitive advantage gained by banks that have received state aid.