The PRA and FCA have jointly published a review of the changes introduced last year which were put in place to reduce the barriers to entry for new banks.
The changes concentrated on:
- reforms to and simplification of the authorisation process for new banks; and
- a major shift in the prudential regulation, such as capital requirements, for new entrants.
The review shows that the changes introduced have led to a number of positive developments. In the twelve months following the changes, the PRA authorised five new banks and there has been a substantial increase in the number of firms discussing the possibility of becoming a bank with the regulators.
In particular the review notes that the new mobilisation option (where authorisation is granted when a firm has met key essential elements but with a restriction on their activities due to some areas still requiring completion) has been helpful. In the twelve months following the changes, three of the five newly authorised banks used the mobilisation option, and a number of firms in the pre-application stage have also shown an interest in this route.
The review states that the FCA is currently undertaking a review of its Handbook to assess whether any current rules that might create barriers to competition should be modified or removed, and to assess whether alternative and more pro-competitive solutions can be identified.