New UK Banks to Benefit from Lower Capital Requirements

Lord Turner, Chairman of the Financial Services Authority, has told the Parliamentary Commission on Banking Standards that new banks in the UK will be allowed to operate with lower capital requirements than existing banking institutions.

The move, which is part of a greater regulatory effort to encourage competition in UK domestic banking, could allow startups to open with core capital of just 4.5% of their assets, adjusted for risk. Dominant banks in the UK currently require a core capital ratio of 9-10%.

The reforms in banking capital are also expected to form part of a larger package aimed at lowering barriers to entry in the banking sector, which will also include an acceleration of the authorization process.