LONDON, Feb 27 (Reuters) - New banks in Britain won’t have to hold as much capital initially as established rivals in a concession aimed at increasing choice in a market dominated by four lenders, the Financial Services Authority said.
The watchdog’s chairman Adair Turner told a UK parliamentary commission on banking standards the FSA will publish a document in coming weeks on removing barriers to entering banking. Barclays, Lloyds, RBS and HSBC account for 80 percent of high street deposits.
“The biggest change we are making is on the prudential side,” Turner said, referring to capital lenders must hold.
“In the past we have had pretty much the same capital and liquidity rules for new entrant banks as for existing players,” Turner said.
He said an entrant would still have to show it could be wound down smoothly and with depositors paid rapidly.
New entrants would be able to start off with a core buffer of 4.5 percent, the starting minimum under new global rules known as Basel III, while Britain’s big lenders will have to maintain buffers of 9.5 to 10 percent because of their size.
New entrants would be given time to build up to 7 percent, the minimum required by the end of 2018 under Basel III.
Turner said the authorisation of top officials at new entrant banks can also be speeded up.
The Financial Times reported on Wednesday that the Co-operative Bank’s deal to buy more 632 branches from Lloyds is under threat because the Co-op faces a 1 billion pound capital hole.
The FSA will be scrapped next month, its powers divided between the Bank of England to oversee capital levels, and a new Financial Conduct Authority.
The FCA will get powers to boost competition and its head, Martin Wheatley, said a competition director will be announced soon and a market study on the general insurance has begun.
“The real change is disruptive technology and mobile banking will be a big change... Structural change to the market could be one of the sets of powers we could use,” he added.
Turner is also looking at whether banks are holding enough capital to cover exposures to “prime” or higher quality mortgages and further “underpinning” may be needed such as Sweden has announced.
Banks have already had to start holding more capital against exposures to commercial property.