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Budget 2016: Gov’t stands up for small lenders

Sarah Davidson

March 16, 2016

The government has confirmed it will “pursue more proportionate capital requirements for small banks and building societies in the European Union” in today’s Budget.

In the finer detail of George Osborne’s Budget the government said: “Access to fairly priced financial services is vital for both households and firms.

“At this Budget the government reaffirms its commitment to boost competition in UK retail financial services, including by pursuing more proportionate capital requirements for small banks and building societies in the EU and working with the New Bank Start-up Unit to promote the authorisation of new banks, building on the three new banks already authorised in this parliament.”

A spokeswoman from the Building Societies Association welcomed the news.

She said: “Much of the regulation and legislation that governs the capital that must be held by building societies and banks now comes from Europe.

“We were encouraged to see a specific commitment from the government today to pursue more proportionate capital requirements for small banks and building societies in the EU.”

The move follows campaigning by mutual and challenger banks to cut onerous capital requirements set by Europe which they consider anti-competitive.

In January Andrew Bailey, chief executive of the Prudential Regulation Authority and who is set to run the Financial Conduct Authority, backed the move to reduce capital requirements for smaller banks which are currently forced to hold more capital against some loans than their larger counterparts.

His comments followed a letter from Andrew Tyrie, chairman of the Treasury Select Committee, to Bailey which urged the PRA to quantify the “competitive disadvantage” under which challengers must operate.


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