In what was one of the last documents to come out of the UK Financial Services Authority (FSA) before it officially split into the Prudential Regulation and Financial Conduct Authorities, the regulator set out proposals to make it easier for new entrants to obtain banking licences. This is a positive initiative to stimulate competition in the highly concentrated UK banking market. However, as the FSA acknowledged, this will not change the banking landscape overnight as the uneven regulatory playing field is but one of a number of barriers to entry for challenger banks versus the very large established players.
The regulator set out proposed changes to both the authorisation process and the capital and liquidity requirements for new bank applicants. The authorisation process will now offer a standard approach with more upfront input and a challenge to applicants from the regulator or an initial streamlined approach whereby successful applicants can be approved subject to committing to significant infrastructure spend.
