• Secure Trust could start non-bank unit to sidestep Osborne tax
  • CEO says `anti-bank tax regime' could push him to mull options

Secure Trust Bank Plc, one of the lenders taking on Britain’s dominant banks, may consider ways to sidestep tax changes pledged by Chancellor of the Exchequer George Osborne after a “disappointing” meeting that the challenger banks held with U.K. Treasury officials.

Paul Lynam, chief executive officer of the Solihull, England-based lender, criticized the government for not supporting the challengers and said he may consider setting up a unit that wouldn’t be classified as a bank or get caught by the tax.

The CEO spoke after he led a meeting Friday between Britain’s smaller banks, including representatives from Aldermore Group Plc and Metro Bank, and senior Treasury officials. The summit was called after Osborne pledged to introduce a surcharge on corporate taxes, hitting all banks, while gradually scrapping the current balance-sheet based bank levy that’s mostly paid by institutions that dwarf the challengers, such as HSBC Holdings Plc and Standard Chartered Plc.

If “there is going to be an aggressive anti-bank tax regime in the U.K., I’m paid by my shareholders to optimize the capital that they give to me, and clearly I’ll have to consider all of my options,” Lynam said in an interview. “We could just go off and create another division that sits outside of the regulated banking environment.”

Lawmakers had encouraged the growth of smaller lenders in the wake of the financial crisis, when some of the U.K.’s largest banks required bailouts to save them from collapse. The challenger banks bristled when Osborne announced the bank levy and surcharge changes, which came after Standard Chartered and HSBC had threatened to leave London. 

Banks making less than 25 million pounds a year ($38.5 million) are exempt from the surcharge. Secure Trust made a pretax profit of 16 million pounds in the first half of 2015.

“While Britain is host to some of the largest and most successful banks on the planet, we also want to see a more vibrant and competitive banking sector with new banks and more innovation,” the Treasury said in an e-mailed statement, calling the incoming tax regime “sustainable and fair.” The Treasury also said it had reduced barriers to entry for new banks, including guaranteeing access to the payments system.

The Treasury didn’t comment directly on whether it would consider amending the tax surcharge, a move that officials at the finance ministry said they would consider during Friday’s meeting, according to Lynam. The Treasury also declined to start a “working committee” with the challenger banks to look at ways to mitigate the impact of the changes, according to Lynam.

“There was plenty of talk, but there wasn’t any walk,” Lynam said. “If they are genuinely keen to foster competition, why would they not want to engage immediately at the executive level with the people who want to create that competition?”

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