challenger bank
{{short description|Small recently created UK retail bank}}
{{Use dmy dates|date=April 2022}}
{{use British English|date=August 2017}}
Challenger banks are small, recently created retail banks that compete directly with the longer-established banks in the UK,{{cite encyclopedia|url=https://en.oxforddictionaries.com/definition/challenger_bank|title=Challenger bank|encyclopedia=OxfordDictionaries.com|publisher=Oxford University Press|year=2017|access-date=18 August 2017|archive-date=18 August 2017|archive-url=https://web.archive.org/web/20170818172736/https://en.oxforddictionaries.com/definition/challenger_bank|url-status=dead}}{{cite book|chapter-url=https://books.google.com/books?id=v9ZdDwAAQBAJ&pg=PA106|chapter=Challenger Banks|page=106|editor-first=Anatoly V.|editor-last=Zhuplev|title=Disruptive Technologies for Business Development and Strategic Advantage|year=2018|publisher=IGI Global|isbn=9781522541493|via=Google Books}}{{cite news|url=https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/12068537/Are-challenger-banks-the-saviours-of-British-banking.html|title=Are challenger banks the saviours of British banking?|first=Tim|last=Wallace|newspaper=The Daily Telegraph|date=December 29, 2015|access-date=August 18, 2017}} sometimes by specialising in areas underserved by the "big four" banks (Barclays, HSBC, Lloyds Banking Group, and NatWest Group). As well as new entrants to the market, some challenger banks were created following divestment from larger banking groups (TSB Bank from Lloyds Banking Group) or wind-down of a failed large bank (Virgin Money from Northern Rock).{{cite book|url=https://books.google.com/books?id=LwDWCgAAQBAJ&pg=PA92|title=The End of the Experiment?: From Competition to the Foundational Economy|first=Andrew|last=Bowman|page=92|publisher=Manchester University Press|year=2014|isbn=978-0-7190-9633-4|via=Google Books}}{{cite web|url=https://www.independent.co.uk/news/business/comment/cybg-virgin-money-merger-approval-challenger-banks-big-five-banks-retail-banking-competition-a8568386.html|title=As watchdogs approve CYBG and Virgin Money's merger, should the big five banks be worried?|first=James|last=Moore|date=October 4, 2018|newspaper=The Independent|access-date=March 12, 2019}}
The banks distinguish themselves from the historic banks by modern financial technology practices, such as online-only operations, that avoid the costs and complexities of traditional banking.{{cite news|url=http://www.computerweekly.com/news/2240238535/Six-challenger-banks-using-IT-to-shake-up-UK-retail-banking|title=Six challenger banks using IT to shake up UK retail banking|first=Karl|last=Flinders|date=January 21, 2015|work=Computer Weekly|access-date=March 13, 2019}}
History
Prior to changes in the regulatory landscape in the UK financial services industry, setting up a new bank, with a full UK banking licence, was extremely expensive and time-consuming. This led to a very small number of banks dominating the UK market—the so-called Big Four—with virtually no competition at all. Indeed, when Metro Bank received their license in 2010, it was the first new high street bank for 100 years.{{cite web |last1=Wallop |first1=Harry |title=Metro bank granted FSA licence |url=https://www.telegraph.co.uk/finance/personalfinance/7377565/Metro-bank-granted-FSA-licence.html |website=The Telegraph |date=5 March 2010 |access-date=19 July 2019}}
In the wake of the 2008 financial crisis, it was decided to open the market up to new banks. After a period of consultation,{{cite web |title=A new approach to financial regulation: transferring consumer credit regulation to the Financial Conduct Authority |url=https://www.gov.uk/government/consultations/a-new-approach-to-financial-regulation-transferring-consumer-credit-regulation-to-the-financial-conduct-authority |website=UK Government |date=16 January 2014 |access-date=19 July 2019}} the regulation to enable this formed part of the Financial Services Act 2012, which came into force on 1 April 2013. A summary and assessment from Harvard Law School can be accessed online.{{cite web |last=Noked |first=Noam |title=Financial Services Act 2012: A New UK Financial Regulatory Framework |url=https://corpgov.law.harvard.edu/2013/03/24/financial-services-act-2012-a-new-uk-financial-regulatory-framework/ |website=Harvard Law School Forum on Corporate Governance and Financial Regulation |access-date=19 July 2019 |date=24 March 2013}}
To assist new firms to enter the banking market, the PRA, part of the Bank of England, set up their New Bank Start-up Unit which guides firms through the process from an expression of interest, through the application process, to 'authorisation with restrictions' if appropriate, and finally to those restrictions being lifted and the firm being granted a full banking license.
In July 2014, the PRA, together with their co-regulators, the Financial Conduct Authority published a review of the requirements, one year on.{{cite web |title=A review of requirements for firms entering into or expanding in the banking sector: one year on |url=https://www.fca.org.uk/publication/thematic-reviews/barriers-to-entry-review-one-year-on.pdf |website=Prudential Regulation Authority |date=July 2014 |access-date=19 July 2019}}
List of challenger banks
This list contains companies that received authorisation from the PRA to operate as banks in the UK.
See also
External links
- [https://www.bankofengland.co.uk/freedom-of-information/2021/new-uk-start-up-banks-authorised-since-2010-as-at-16-february-2021 List of authorised UK start-up banks] {{as of|lc=y|2021|2|16}}, by the Bank of England
References
{{reflist}}
{{Commercial and retail banks in the United Kingdom}}
Category:Banks of the United Kingdom
{{UK-bank-stub}}