By Huw Jones
LONDON Oct 24 New UK banks would be treated
more leniently over capital rules by showing that customer
deposits would be handed back quickly in a crisis, Britain's top
banking supervisor said on Wednesday.
Andrew Bailey, head of banks supervision at the Financial
Services Authority, said the UK banking sector remains very
concentrated because, unlike in the United States, very few
lenders leave the market.
Barriers to entry were set very high in the past because
there was no mechanism for winding down troubled banks quickly
and without disrupting the market.
Since the 2007-09 financial crisis, such a mechanism has
been put in place along with stronger protection for customers'
money so that any deposit up to 85,000 pounds is protected.
Britain's government wants more competition on the high
street where just four banks dominate: HSBC, Barclays
, Lloyds and RBS. New entrants such as
Aldermore and Metro Bank have yet to make large inroads.
"We are prepared to lower the entry barriers to new banks in
this country and we have already done that in one or two cases,"
Bailey told a financial industry conference.
New entrants that can show how much each customer has in
deposits and have workable resolution plans would get leeway on
how much capital they should hold initially, Bailey added.
Britain was "on the way" to having a clear public
understanding that deposits up to 85,000 pounds were safe
whatever happened to the bank, a condition for giving customers
the confidence to switch lenders, Bailey said.
UK financial services minister Greg Clark told the
conference that protecting depositors was of the utmost
importance after the queues of people trying to withdraw their
savings from Northern Rock in 2007.
It was Britain's first bank run in a century.
Clark said the government will reinforce protection of
depositors from 2019 by changing the law to introduce so-called
depositor preference, meaning if a bank goes bust, bank
creditors would be hit before depositors.
Britain's position clashes with a draft European Union law
on dealing with failing banks which proposes giving bondholders
similar or better protection to deposit guarantee schemes in an