July 8, 2014 / 8:01 PM / 4 years ago

UK banks say market share caps would stifle competition

* UK opposition Labour has called for caps on market share

* Banks say move would lead to ‘banking for the few’

By Matt Scuffham

LONDON, July 8 (Reuters) - Plans by Britain’s opposition Labour party to limit the market share of individual banks could leave some customers without banking services, the head of the British Bankers’ Association (BBA) said.

Labour wants to inject more competition into banking by creating two new banks and imposing a cap on the share of personal banking and small business lending any single institution can have.

The BBA’s Chief Executive Anthony Browne said that would undermine the service that banks currently offer.

“We should be encouraging banks to take on new customers not demanding that they dream up new ways of losing them,” Browne, speaking to bankers at a dinner in the City of London, said.

“It doesn’t take a genius to see where that could lead - worse customer service, and a focus on the customers who can pay the most. Banking for the few, not the many. A measure aimed at promoting competition will instead stifle it.”

Politicians from all parties want challengers to emerge to break the dominance of Britain’s biggest five banks - Lloyds Banking Group, Royal Bank of Scotland, Barclays , HSBC and Santander UK - which account for more than three-quarters of lending to individuals and small businesses.

The Bank of England and the Financial Conduct Authority said on Monday that more than 25 potential banking applicants had been interviewed and five new banks had been approved since rules for new challengers were eased last year.

Browne also said regulatory uncertainty was leading banks to withdraw from emerging markets. He said the demands placed on banks to know their customer’s customer, even in countries where such records are not routinely kept, left them with little choice but to terminate relationships or risk big fines.

Editing by Jane Merriman

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