UK parliamentary challengers group calls for financial services big bang

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The UK All-Party Parliamentary Group (APPG) for Challenger Banks and Building Societies has explained how further reforms in the financial services sector could support the government’s upgrading programme.

APPG calls for a ‘big bang’ in financial services

Banking challenger APPG has made five recommendations, including calling for a new “big bang” in financial services to break the dominance of Britain’s big five banks, which it says remain “isolated from the forces of competition”.

He also wants to reduce regulations that stifle innovation, strengthen open banking and FSCS protections, match regulatory thresholds with international competitors, and boost financial education.

The group’s chair, Karen Bradley, MP, says financial services can play a “big role” in the government’s leveling program and the current cost of living crisis, “but overly cautious regulation is holding them back”.

Bradley adds that the APPG’s recommendations are “easily implemented within the current financial services bill, are cost-neutral, and have the potential to bring real and lasting change to communities in across the UK”.

The group says the government should use its Financial Services and Markets Bill “to drive fundamental change” in the UK’s financial sector.

The current regulatory regime is holding back challenger banks and stifling competition, according to the group, and an “obsession” with avoiding failure has led to an uneven playing field for challengers and big banks.

One of the regulatory hurdles highlighted by the group is the MREL threshold – the minimum amount of equity and debt a company must maintain – which is set lower in the UK than elsewhere in the world and which discourages growth and innovation.

“How can challenger institutions compete here with a £15bn threshold when in other jurisdictions such as the EU the threshold is £100bn and in the US £250bn? dollars?” asks the group.

Metro Bank CEO Dan Frumkin says, “If done right, channeling new investment, funding and opportunity will change the fortunes of entire communities.

“Challenge banks and building societies, including community banks like Metro Bank, are poised to play an important role in this – but our potential continues to be held back as rules and regulations aimed at reducing the risk of the most big banks in the UK actually prevent the challengers from growing. and shake the bank for the better.

Regulators should rethink the regulatory landscape, the group says, to support the growth and development of new building societies and regional and community banks as seen in the United States.

A lack of competition means less availability of loans outside London and the South East, “which acts as a significant drag on the leveling of the economy”.

The APPG adds that capital rules for companies headquartered or operating in leveling areas should be scrapped to make it easier to start and grow businesses outside of London and the South East.

Furthermore, it recommends the government to upgrade the banking sector by requiring banks to offer branches to challengers before closing them as well as financial incentives for challengers to open new ones, especially where there are no existing ones. currently has no other bank branches.

The group also wants to boost the fintech sector by improving the open banking model and FSCS-like protection for those who invest in regulated fintech institutions.

The booming fintech sector has exposed flaws in the open banking model, the group said, and steps should be taken to allow open banking to provide a holistic view of an individual’s financial situation.

He adds that financial literacy in schools and universities should also be improved, and that financial education should be part of the curriculum in primary and secondary schools.

“For a nation that prides itself on being a global financial services hub, the lack of universal financial education in schools is embarrassing,” the group says.

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