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LONDON, Dec 14 (Reuters) - Britain's new banks are likely to obtain relief on the amount of capital they must hold to cover the risk of default on home loans, a top Bank of England official said on Wednesday.
Though 20 so-called challenger banks have entered the market in recent years, they have yet to win any significant market share and complain that they face unfair competition from the four biggest lenders HSBC, Lloyds, Barclays and RBS.
The newcomers, including the likes of Virgin Money and Aldermore, argue that they have to set aside disproportionately high levels of capital compared with the Big Four.
Bank of England deputy governor Sam Woods said this is because they have to follow standard rules on calculating capital buffers while the larger lenders have the resources to use in-house models that typically produce lower figures.
But the situation could change if global regulators at the Basel Committee reach a deal in January on a new package of bank capital rules, including a more proportionate approach in standard rules for home loans.
"There is a reasonable prospect of landing that," Woods told parliament's Treasury Select Committee.
However, he warned that he won't go soft on capital. "We need robust capital requirements for all banks," he said.
The queue for banking licences is still reasonably strong after the 20 already authorised since 2013.
"I am expecting this number to increase. It was not just a one-off hump," Woods said.
Regulators are under pressure to boost competition after the committee ripped apart a recent review of retail banking by the Competition and Markets Authority for failing to take radical action.
Treasury Select Committee Chairman Andrew Tyrie said that lawmakers are "very eager" to see millions of retail bank customers get a better a deal.
Reporting by Huw Jones; Editing by David Goodman