The Competition and Markets Authority (CMA) has published two working papers as part of its investigation into the supply of personal current accounts and of banking services to small and medium-sized enterprises:

Working paper on Barriers to entry and expansion: capital requirements, IT and payment systems

Key findings include:

  • Most new entrants agree that the authorisation process (including the capital requirements element) is proportionate and efficient and does not present a barrier to entry.
  • New entrants and smaller banks have raised concerns that capital regulations favour larger banks and as a result may act as a barrier to expansion because large, established banks are able to follow the Internal Ratings Base (IRB) approach, whereas new entrants and smaller banks have to follow the standardised approach due to the high fixed costs of using the IRB approach.
  • As a counter balance, large systemic banks in particular are required to hold a number of additional capital buffers such as capital conservation and countercyclical buffers as well as buffers for globally systemic institutions and for ring-fenced banks.

Working paper on Summary of entry and expansion in retail banking

Key points include: 

  • The identification of three possible channels of entry into the UK retail banking market – organic entry, divestment and entry by a firm with ancillary financial services products.
  • Four prospective entrants to the personal current accounts market have been acknowledged – Atom, Starling, Civilised Bank and OakNorth.
  • Several new players have recently entered the niche SME lending market, including Aldermore, Shawbrook and Paragon, in addition those which had also entered the personal current account market noted above.

Work is ongoing in the remaining areas not covered by these working papers and the CMA will report on these before or at the provisional findings stage.