UPDATE 1-UK regulator talking to 25 potential new banks -lawmaker
* Competition should trump regulation, lawmaker says
* Will consider recommendations on capital, payments (Adds further comments from UK Economic Secretary)
By Matt Scuffham
LONDON, June 24 (Reuters) - Britain's financial regulator is talking to 25 potential new banks as part of moves to increase competition within the sector, the country's economic secretary said on Tuesday.
Lawmakers and regulators are keen to see challengers appear to break the dominance of Britain's biggest four banks - Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC - which account for more than three-quarters of lending to individuals and small businesses.
"We are trying to make sure that it is much easier to set up a new bank and to grow market share. Reforms should be as much about competition as safety and stability," Andrea Leadsom, a Conservative lawmaker and economic secretary to the Treasury, told a conference organised by the British Bankers' Association.
Leadsom said the government would consider proposals put forward by the BBA, an industry lobby group, in a report published on Monday. These include levelling the playing field so that challenger banks do not need to hold more capital against some loans than established rivals and making it cheaper for newcomers to access the industry's payments system.
Leadsom said moves to promote competition should be prioritised over increased regulation of the industry.
"Competition should always trump regulation, not the other way round," the former banker told the conference.
Leadsom also said Britain's new payments regulator would examine the benefits and cost of introducing a system that would enable customers to switch banks without changing their account numbers.
(Reporting by Matt Scuffham; Editing by Steve Slater and Kirstin Ridley)
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