Challenger banks dealt blow by CMA

Challenger banks dealt blow by CMA




Challenger banks and new entrants to the banking sector have been dealt a blow by the watchdog.

Challenger banks and new entrants to the banking sector have been dealt a blow after the Competition and Markets Authority (CMA) found no “strong evidence” to suggest the government’s new corporation tax will impact on smaller lenders.

 
In January this year the government introduced the bank corporation tax surcharge and changes to the bank levy, moves that were met with resistance from the challenger banks.
 
However, in its retail banking market report, the CMA found there was not sufficient evidence to suggest that these changes will affect the smaller banks more than the major lenders.
 
It also found no strong evidence to prove that they will deter new entrants or further expansion within the sector.
 
Rishi Khosla, CEO and Co-Founder of OakNorth Bank, disagrees with the findings and is critical of the CMA for not being more proactive in its approach.
 
Rishi told Bridging and Commercial: “Any new player considering entering the market or any investor considering investing in the sector will be deterred because it has suddenly become 8% less attractive. 
 
"The CMA has said that from its investigation, there is ‘no strong evidence’ at this time that the introduction of the surcharge, combined with the changes to the bank levy, will deter entry or expansion or result in existing banks exiting.
 
“However, it acknowledges that the full impact of the changes may take time to emerge so its proposed remedy is to simply monitor the situation and act if this does occur.” 
 
A number of banks responded to the CMA when asked about the impact of the bank levy and tax changes.
 
Among those that replied was Secure Trust Bank, which expects the new regime to create “a competitive disadvantage with non-banking companies and reduce lending to SMEs.”
 
Another respondent was Virgin which expects the changes to delay its IPO targets by a year.
 
The CMA said it will extend its banking investigation as it prepares to release its final report.

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