U.K. Bank Lobby Calls for Relaxation of Rules for Small Lenders

U.K. policy makers should relax rules for smaller lenders to stimulate competition in the industry, according to the British Bankers’ Association.

Regulators need to ease rules determining how much capital so-called challengers should hold, and review whether the companies are paying too much to access the payments system used by the country’s banks, according to a report commissioned by the BBA. Municipal governments should also be encouraged to invest funds with emerging banks, the BBA said.

“It’s vital that we don’t treat all banking markets as the same and introduce rules, regulations and costs that smother changes that are already driving competition,” James Barty, the BBA’s director of strategy, said in a statement.

Policy makers are trying to loosen the grip of Britain’s four biggest lenders, which control as much as 80 percent of the market and have been hit by scandals including the mis-selling of payment-protection insurance. Challengers such as TSB Banking Group Plc, Virgin Money Plc and Metro Bank Plc, which are trying to gain a greater share of the market, still only account for less than 5 percent of deposits in the U.K., according to figures compiled by the Bank of England.

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