A rising number of UK businesses are applying for banking licences as the minimum required in capital for new entrants has droped from £5m ($8.5m) to £1m.
According to the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA), five times as many businesses are currently applying for licences as were granted them last year.
Regulators held 47 meetings with applicants between March 2013 and March 2014, a number equivalent to the meetings that were held over the past three years.
Andrew Bailey, the chief executive of the PRA, said: "It is clear that the changes introduced last year have been positive for new entrants and will make a contribution to increasing competition and thus benefit customers."
Currently, the majority of business lending and current accounts are held by the country’s biggest lenders – HSBC, Lloyds Banking Group, Royal Bank of Scotland and Barclays.
To encourage new entrants and make the banking market more competitive, the Government gave the FCA new powers to lift barriers and thus avoid the failure of its predecessor, the Financial Services Authority (FSA).
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By GlobalDataLast year, the Parliamentary Commission on Banking Standards reported that the FSA had "displayed an instinctive resistance to new entrants", making the system "time consuming and costly".
"Reducing barriers to entry can be achieved alongside continuing to ensure new banks meet basic standards that prevent risks to the safety and soundness of the UK financial system," Bailey added.
New measures include a ‘mobilisation’ process, which allows businesses to attract investors by granting them a partial licence before they have to commit to hiring staff or investing in IT systems, giving them time to do so.
The British Bankers’ Association (BBA) urged the regulators to go further: "The PRA should allow smaller banks to hold less capital against the safest forms of lending," said Simon Hills, the BBA’s executive director for prudential capital and risk.
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