LONDON Feb 24 The Bank of England proposed on
Friday to allow new banks to hold less capital from next January
to help them win more market share from the "Big Four" lenders
that dominate high streets.
The BoE's Prudential Regulation Authority (PRA) published
proposals to "refine" its system of "Pillar 2A" capital
requirements add-ons that top up the minimum requirements all
lenders must hold.
"This consultation is a major step forward for the PRA in
facilitating effective competition, reducing capital
requirements for eligible small firms," PRA Chief Executive and
BoE Deputy Governor Sam Woods said.
"This will be good for competition and for safety and
The government wants more competition in banking, a sector
dominated by RBS, HSBC, Lloyds and
"The Prudential Regulation Authority's consultation is a
positive step in closing the gap between challengers and the big
banks," financial services minister Simon Kirby said.
New banks have said they are penalised when it comes to
setting aside capital to cover default risks from mortgages on
The big banks can use their own models, vetted by
regulators, to calculate how much capital they should hold to
cover risks from home loans.
But the new banks typically use the "standard approach" set
down by regulators, and which has less wiggle room.
Under the proposals, PRA supervisors could take into account
the greater degree of conservatism that may apply to risks from
some types of exposures, especially mortgages, when deciding how
much add-on capital is needed.
The PRA would also apply rules now being finalised by global
banking regulators to iron out differences between models and
the standard approach, if they are passed.
(Reporting by Huw Jones; Editing by Mark Trevelyan)