UK to give new banks lower capital requirements

New banks in Britain will not have to hold as much capital initially as established rivals, the country's Financial Services Authority said, in a concession aimed at increasing choice in a market dominated by four lenders.

The watchdog's chairman, Adair Turner, told a parliamentary commission on banking standards that the FSA will publish a document in the coming weeks on removing barriers to entering banking. Barclays, Lloyds, RBS and HSBC account for 80 per cent of high street deposits.

"The biggest change we are making is on the prudential side," Turner said, referring to the capital lenders must hold.

"In the past we have had pretty much the same capital and liquidity rules for new entrant banks as for existing players."

He said an entrant would still have to show it could be wound down smoothly and with depositors paid rapidly.

New entrants would be able to start off with a core buffer of 4.5 per cent, the starting minimum under new global rules known as Basel III, while Britain's big lenders will have to maintain buffers of 9.5 to 10 per cent.

New entrants would be given time to build up to 7 per cent, the minimum required by the end of 2018 under Basel III.

Turner said the authorisation of top officials at new entrant banks can also be speeded up.

He was also looking at whether banks were holding enough capital to cover exposures to "prime" or higher-quality mortgages, and further "underpinning" may be needed. Banks have already had to start holding more capital against exposures to commercial property.

The FSA will be scrapped next month, its powers divided between the Bank of England, which will oversee capital levels, and a new Financial Conduct Authority.

The FCA will get powers to boost competition, and its head, Martin Wheatley, said a competition director will be named soon.