Challengers lambast competition watchdog’s report for focussing on technology and ignoring red tape issues
Challenger banks have lambasted the competition watchdog for squandering a rare opportunity for change in a sector dominated by larger players.
Many of the UK’s up-and-coming lenders were disappointed that yesterday’s final report from the Competition and Markets Authority’s (CMA) retail banking investigation focused more on using technology to disrupt the sector than on tearing down some of the red tape which they say has hampered their businesses.
Alasdair Smith, chair of the investigation, said its central reform will be the Open Banking programme, which will allow personal customers and small businesses to share their data securely with other banks and third parties, as well as enabling them to manage accounts with multiple providers through a single digital app.
Read more: The CMA missed its opportunity to end the big bank oligopoly
Shares in the UK’s largest lenders rose on the news.
Metro Bank chief executive Craig Donaldson said he was “astonished” by the failure to look at capital requirements for challengers, and accused the CMA of “tinkering around the edges” of reform.
“Disproportionate capital requirements are anti-competitive and unduly support the large incumbent banks by allowing them to hold up to 10 times less capital for the same loans than challenger banks,” Donaldson said.
Mark Sismey-Durrant, chief executive at Hampshire Trust Bank, added: “We understand the CMA does not have powers to alter the capital funding requirements, but the report could have been a good platform to bring this issue, which impacts challenger and specialist banks, to the fore.”
Read more: Banking bazooka? CMA report great for fintech, costly for banks
Writing in City PM today, Phillip Monks, chief executive of Aldermore, said: “Challenger banks are not after any special treatment, just a banking system in which they can compete in order to support the goal of better choice for consumers.”
Other challengers were concerned the review did not go far enough to boost transparency across lenders.
TSB boss Paul Pester said: “Banking must be the only industry that doesn’t tell its customers how much they are paying for their services.”
Read more: How have bank shares reacted to the CMA's retail banking investigation?
However, yesterday’s report may represent a temporary blip for challengers’ hopes for reform. A unit in the Treasury set up to examine competition in the sector is understood to still be running under Theresa May’s government.
Rishi Khosla, co-founder and chief executive of OakNorth Bank, told City PM his firm felt “the government is supportive” and may be able to help challengers out in areas, such as the bank profits surcharge, that may have been “harder for its predecessor to do”.
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