OakNorth Bank was responding to last week’s creation of the New Bank Start-Up Unit, a joint initiative from the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), which is aimed at providing support to newly authorised banks and those firms thinking about becoming banks.
Rishi Khosla, CEO of OakNorth Bank, said the unit would be helpful by making the process of becoming a bank easier, but it would not solve the problem of a lack of competition in the sector.
“Unless more is done to create a level playing field between the new smaller banks and the larger incumbents in terms of regulatory reporting and capital requirements, the new bank start-up unit’s efforts might be in vain,” said Rishi.
Andrew Bailey, CEO of the PRA, and set to become the new Chief Executive of the FCA, said the unit will build on the work the regulators have already done to reduce barriers to entry for prospective banks.
"These new banks are a key part of bringing innovation to the sector, particularly where there is a gap in the market – whether it is the service they provide, the customers they target, the products they sell or the technology they use,” said Andrew.
"With the launch of the New Bank Start-up Unit, applicants will now benefit from having a single place where they can get the advice and guidance they need to start a new bank and support once they are authorised.”
As well as advice and support the New Bank Start-Up Unit will provide case officers during the authorisation process, regular capital and liquidity reviews, monthly regulatory update e-mails and invitations to seminars targeted at new and prospective banks.
Tracey McDermott, Acting CEO of the FCA, said it will also assist those wanting to start a new bank to navigate the regulatory process.
“Increasing competition in the banking sector is important for consumers and the new unit will offer firms an accessible way to find the information they need to get themselves authorised,” said Tracey.
However, OakNorth has expressed reservations about the regulators’ approach which follows criticism of the PRA by the Chairman of the Treasury who questioned the regulator about the disadvantages under which new banks operate.
Rishi said: “The authorisation process to become a new bank in the UK is not easy; it requires a huge amount of patience and persistence and unless you can meet all of the requirements – capital, technology, and regulatory – your application won’t be approved,” said Rishi.
“If you’re fortunate enough to be awarded a license, it will still be several months before you’re fully up and running as you’ll need to pass the mobilisation phase.”
However, Harriet Baldwin, Economic Secretary to the Treasury, maintains that boosting competition in the banking sector is part of the government’s long-term plan.
“I’m delighted that the Prudential Regulation Authority and Financial Conduct Authority have now established a dedicated New Bank Start-up Unit, helping new banks to enter the market and through the early days of authorisation,” said Harriett.
“Building on the three new banks that have already established this parliament, this unit will help to stimulate even more competition and diversity in Britain's banking sector.”
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