Finance Rebecca Smith · 9 October 2015
Andrew Tyrie urges PRA to consider impact of bank tax on challengers
Andrew Tyrie, the Conservative chairman of the Treasury select committee has written to the Prudential Regulation Authority, urging it to assess whether the eight per cent surcharge on profits over 25m could restrict competition and reduce lending at retail banks. He feels the Bank of England needs to review George Osborne’s proposal from the Summer Budget to make sure the smaller challenger banks will still be able to develop and take on the bigger lenders. Tyrie said deputy governor, Andrew Bailey, ought to properly reviewthe bank tax. millions of consumers and small businesses have been getting a poor deal for decades because of inadequate competition and choice in banking. It is crucial that competition from new and smaller banks is not unnecessarily impeded by prudential regulation, Tyrie said. The extra tax is part of a series of measures which will raise an additional 1.6bn over the next five years, though it also features a reduction in the bank levy that hit the big international banks hard. Some of the UK’s challenger banks have claimed the changes will now shift some of the burden onto the smallest names within the industry hindering their ability to lend and take on the biggest banks. The four biggest lenders Lloyds, RBS, Barclays and HSBC provide around three-quarters of personal current accounts and make nine out of every ten business loan. it is essential that the surcharge does not obstruct Parliament’s efforts over the last four years to increase competition in the banking sector. The committee will want an assurance from the PRA that it has assessed its effect on competition in the retail sector, Tyrie added. His letter followed a refusal from the Treasury to relieve smaller lenders from the charge. A group of some of Britain’s smaller banks had put together proposals intended to offset the new tax as an alternative arrangement, with the likes of Shawbrook, Close Brothers and Metro Bank all contributing. The CEO of TSB has suggested the threshold for paying the tax be increased to profits of 250m per year, and Nationwide Building Society’s Graham Beale feels mutual lenders should be exempted from the tax.
ABOUT THE EXPERTRebecca Smith
Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.