Campaigning has paid off for the UK’s challenger banks as the Treasury has said it will meet with them at least four times a year in a bid to ease tensions following a dispute over financial taxes.
According to The Telegraph, The Challenger Bank High Level Advisory Group will be chaired by the Treasury’s top financial services official Charles Roxburgh.
During the Summer Budget, George Osborne announced he would be cutting the bank levy (which hit the bigger, more established names hardest) and instead introducing a corporation tax surcharge of eight per cent, affecting all banks with profits of more than £25m per year.
This new announcement is an attempt by the chancellor to show the small lenders they will be heard and won’t lose out to the bigger banks.
The proposed surcharge resulted in a backlash from challenger banks and building societies, which said it was both unfair and a hindrance, since it would restrict their ability to grow when the government claimed it wanted to encourage competition in the banking sector.
Up until now, despite numerous lobbying efforts from a range of challenger banks, the Treasury had remained unmoved on the issue, with little in the way of tangible results.
Challenger banks will hope the new group can give them more sway over policy and the opportunity to explain the effect such changes would have on smaller names – not just the big banks.
Another recent issue of contention for smaller lenders was the initial investigation by the Competition and Markets Authority into the sector, which ruled there were significant problems in the functioning of the personal current account markets, as well as the small business banking sector.
The proposals to address the situation though, including ways to make it easier for customers to switch and compare the service on offer between banks, were deemed insufficient and ineffective by challenger banks.
Rishi Khosla, CEO of OakNorth bank, said the CMA remedies needed to create “a real and tangible change, not just a PR campaign” to ensure small businesses were fully aware of their options and to encourage people to shop around.
He expressed scepticism over the outlined proposals doing so, pointing to the “habit of borrowing form your day-to-day business bank” as being “deep-seated,” and “stubborn”.
A memo seen by The Telegraph said the new group will aim to “facilitate and aid discussion to assess the environment for challenger banks and explore new ways to improve competition in banking further”.
The group will “consider issues – be they of a policy, regulatory or legal nature – relevant to helping challenger banks to enter the market, expand and compete effectively with the incumbents”.
Sign up to our newsletter to get the latest from Business Advice.