Small banks get chance to demand end to easier capital rules for the biggest lenders

Tim Wallace
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CHALLENGER banks will demand action to level the playing field between them and the big banks in a series of meetings with the Bank of England in the coming weeks, City A.M. has learned.

Officials will meet the banks to discuss the implementation of new EU rules on capital levels. And the lenders hope it is a chance at last for their voices to be heard on key issues which they feel are preventing them competing with big banks.

“Risk weightings applied to us mean that for the same customer, I have to hold five times more capital than a larger incumbent. That is very anti-competitive,” Metro Bank chief Craig Donaldson told City A.M. “To apply for our own weightings like the big banks, we need seven years of data. But the PRA use the big banks’ data, take an average of that and apply it to us.”

Secure Trust Bank’s Paul Lynam agrees, arguing small lenders’ data is a drop in the ocean compared with what is already available to regulators.

“We could collect this data for 1,000 years and still not have as much as the big lenders and the PRA have now – so why not let us use that?” he said.

Other lenders will raise fears over red tape. “We want the Bank to be proportionate, to ensure the smallest are not wiped out by the cost of compliance,” said Andrew Turbival-Smith from Weatherby’s.