FCA Report Examines Reduction in Barriers of Entry to Banking Sector

The evaluation report examines the benefits that the 2013 review has generated for consumers and identifies lessons that can be applied to the current and future work. The report emphasizes that it takes time for lowering barriers to entry to affect market shares in the banking sector in a significant way because there may be other barriers to firms expanding to a more significant scale. The following are the key findings of the evaluation:

• There is a more efficient authorizations process: the time taken to assess firms’ applications has reduced by three months.
• The rate of entry into the UK banking sector is higher than before the 2013 review. While not all entry can be solely attributed to the changes in the authorization process, firm interviews have indicated that the interventions have encouraged entry into the UK banking sector.
• The increase in entry has in turn led to a greater range of product offerings in the retail market and benefits for consumers. For example, mortgage borrowers of post-review entrants saved about GBP 3 million in interest payments in the first year of their loans when comparing charges on similar mortgages in 2017.
• However, there has not yet been a substantial change to concentration in the retail banking sector, nor has there been an evidence of significant competitive responses (for example, more attractive borrowing rates) by incumbent banks.

Related Links

• Press Release
• Evaluation Report (PDF)
• Review from 2013 (PDF)
• Technical Annex (PDF)
• Ex Post Impact Evaluation Framework (PDF)

Keywords: Europe, UK, Banking, Barriers to Entry, Authorization Process, BoE, FCA