© Reuters. IN THE UNITED KINGDOM, THE SMALL BANKS FLOCKED TO RECEIVE FUNDS
by Emma Rumney
LONDON (Reuters) – small british banks are applying to take advantage of new financial resources which the government hopes will allow them to get a place in the market of credit to businesses.
It’s been years that London wants to weaken the dominant position of the big four banks in lending to SMES. HSBC, Barclays (LON:BARC), RBS and Lloyds Banking Group, controls more than 70% of the current accounts of the companies.
The british government and the european Commission (EC) have instructed RBS to create two funds, a combined amount of 775 million pounds (€882 million). The bank had received a public assistance of 45.5 billion pounds during the financial crisis, which some saw as an advantage in dodging.
“One of the consequences of the 2008-2009 crisis has been a concentration of huge financial services,” said Anne Boden, executive director of the bank in line Starling Bank, launched in 2014.
Deposits of application to benefit from the fund will be open next year. One, with 350 million books, is to encourage the customer to go and see in the competition, while the £ 425 million will allow new entrants to invest in their supply of credit to SMES.
Virgin Money and Starling Bank have already prepared their entry in the “corporate banking”, while the bank Monzo, which is based on a downloadable application on a smartphone, is also considering after having previously excluded.
Virgin Money, which will offer its customers access to partner services, will be able to apply for three programs (“grants”) representing a total of 45 million pounds and open to new entrants.
Starling expects to have implemented its service before applying for one of the three largest programs ranging from 60 million to 120 million pounds and are intended for facilities already operational.
“Our position is really unique for this (…) and we have every confidence in our ability to take it,” said Boden, agreeing, however, that the competition was more intense. “I think (the fund) are, without a doubt insufficient; it could be a lot more”.
Tandem, another digital player, will be the owner of a license bank and a subsidiary bank if its TAKEOVER of Harrods Bank is approved; it has to be in the running for the four “pools”, bringing together the various “grants”, offered.
“The competition took off at present,” said Ricky Knox, managing director of Tandem. “It is not at a stage where we can’t really take it seriously, but wait two or three years”.
Clydesdale and Yorkshire Bank (CYBG), TSB and Metro Bank are also in the race.
CYBG is currently testing a service for online credit to companies, and is developed in Birmingham and the West Midlands, which should allow him to apply for the three largest programs.
Santander meets the eligibility criteria, which has aroused a lot of criticism because its parent company, the Spanish bank, Banco Santander (MC:SAN), is one of the largest banks in the world.
Nathan Bostock, chief executive of Santander UK, believes that the bank no longer has to prove his ability to convince the depositors to change banks.
“We will build things that we think will help the customers to make this choice”, he said, making reference to new products and services that the bank will propose in the framework of the application.
Bostock observes that it has always been very difficult to take market share away from the big four banks. They control the market since 1970, according to a report released by the government in 2016, and their dominant position has hardly been affected by the arrival of several new entrants.
According to the Competition and Markets Authority (CMA), the rate of termination of the current account to move to the competition was of the order of only 4% in 2014 even though thousands of businesses have been in trouble with the big banks in the past. Some have accused RBS of the have pushed the bankruptcy to retrieve their assets at low prices during and after the financial crisis.
The constitution of the two funds is the way that the british government has found to strengthen competition in the banking sector after RBS had failed to sell its subsidiary, corporate banking, Williams & Glyn.
A transfer of market share of RBS to 3% in favour of new competitors is expected. Williams & Glyn account 220.000 SMES about as a client.
(Wilfrid Exbrayat for the French service)