Both the PRA and the FCA said that, in the 12 months ending 31 March, they had given five banking licences and were in discussion with 25 further applicants.
The rush of so-called challenger banks follows last year’s simplification of the authorisation process for new banks, which included easing the burden of capital requirements for new entrants.
Both regulators said the measures would enable increased competition in the banking industry and would benefit customers.
The five banks authorised between 1 April 2013 and 31 March 2014 are: Axis Bank UK; Union Bank of India (UK); FCMB (UK); UBA Capital (Europe); and Paragon Bank plc.
Andrew Bailey, chief executive of the PRA, said: “It is clear that the changes introduced last year have been positive for new entrants and will make a contribution to increasing competition and thus benefit customers.”
Three of the five newly authorised banks made use of a ‘mobilisation’ option.
This is where authorisation is granted when a firm has met key essential elements but with a restriction on their activities, owing to some areas still requiring completion. These include investing in expensive IT systems without the certainty of being authorised. A number of firms in the pre-application stage have also shown an interest in this route.
Industry view
Jaroslaw Knapik, senior analyst at financial services business consultancy Ovum, said consumers were showing a renewed interest for branch-based banking. He said: “With people unlikely to sign up for new products and services after queuing, making customers relaxed throughout the experience is key in transforming branches. This will happen alongside a focus on increasing efficiency, including reducing headcount and the installation of express banking terminals.”
