BBA calls for action to boost competition between banks

IN: Industry news

Ministers and regulators must take action to encourage competition in the banking sector, according to the British Bankers' Association (BBA).

Ministers and regulators must take action to encourage competition in the banking sector, according to the British Bankers' Association (BBA). undefined

Even though banks already compete "vigorously" for customers, there are a number of strategies that can be used to help new providers set up and grow, according to a report from the industry group.

One recommendation from the BBA is to 'level the capital playing field'. The association argued that legislation governing how much capital institutions should hold has a disproportionate impact on challenger banks.

It was also argued that there should be no barriers stopping public sector bodies from investing funds in challenger banks. Currently, local authorities and government departments do not make deposits in these emerging providers.

In terms of regulation, the BBA urged authorities to give more thought to how smaller companies in the banking sector are affected by rules and restrictions. It called for a more proportionate approach, meaning challenger banks would not be expected to meet all of the standards imposed on their larger competitors.

Putting its suggestions into context, the industry association referred to the airline and retail sectors, where the success of new entrants has increased choice and reduced prices for consumers.

James Barty, director of strategy at the BBA, said the extent to which companies like easyJet, Ocado and Lidl have "shaken up" their respective industries shows that customers are the biggest winners from competition.

Focusing on banking, he pointed out that the sector is comprised of several different markets, each of which has its own providers.

"Many of these markets are already extremely competitive but we want ministers and regulators to make it easier for emerging banks to set up and grow," said Mr Barty.

"The best way to promote competition is by creating a more level playing field for players of all shapes and sizes. It's vital that we don't treat all banking markets as the same and introduce rules, regulations and costs that smother changes that are already driving competition."

In a recent YouGov poll commissioned by the BBA, 57 per cent of customers said banks offered sufficient choice in terms of their products and services, while ten per cent didn't think so.

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