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OFT to open door for new entrants to banking sector

The Office of Fair Trading says it is in discussions with the Government to help facilitate the entry of new players into the banking sector.

In its Financial Services Plan, the OFT says it will make sure to carefully monitor any undue competitive advantage gleaned from Government bail outs. This echoes a recent statement from the EU Commission, which hinted that European bailed out banks may be broken up to ensure a level playing field.

The OFT report says: “The financial crisis has led governments around the world to intervene in the banking sector and financial markets. The OFT is concerned to ensure that over the long-term these measures do not threaten competition or the ability of financial markets to work well for consumers.”

It says, as a part of its remit to promote competition and fairness in the market, it has already been in discussion with Government to encourage entry into the banking market.

This will further fuel speculation that both Tesco Finance and Virgin Money will be entering into the banking sector, possibly as suitors to buy the nationalised Northern Rock bank, which the Government is keen to re-privatise.

The OFT also warned that it would carefully monitor any moves by the FSA to further regulate products and services. It says it will be “highlighting areas where regulation may unnecessarily or disproportionately restrict competition or consumer benefits.”


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