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December 20, 2018

FCA published a report evaluating the impact that the 2013 review by the Financial Services Authority and BoE has had on reducing the barriers to entry for firms entering the banking sector in the UK. Additionally, FCA published the technical annex that provides supporting details to the analysis conducted during the evaluation. Also published was a report outlining how FCA uses ex post impact evaluation to assess the impact of its past interventions on consumers, firms, and markets.

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.

 

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

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