Economic Secretary to the Treasury, Bim Afolami, engaged in discussions with challenger bank executives this week, focusing on regulatory challenges hindering their ability to increase lending amid the UK’s economic recovery efforts.
Attendees included Monzo, OneSavings Bank, Metro Bank, and TSB. Concerns were raised about the Prudential Regulation Authority’s (PRA) adoption of the Basel 3.1 banking framework, particularly the potential removal of the ‘SME support factor,’ which currently permits banks to maintain lower capital reserves against SME loans.
This change is feared to significantly impede growth opportunities for these banks. The meeting underscored the balance the PRA must strike with its new competitiveness objective against the backdrop of Basel 3.1’s implementation, marking a pivotal moment for UK banking regulation and its impact on economic revitalisation, particularly for SMEs.
A Treasury spokesperson said:
“Basel 3.1 aims to strengthen the regulation, supervision and risk management of banks in response to the global financial crisis.
“The Prudential Regulation Authority, which is overseeing the implementation of Basel in the UK, estimates proposals will increase capital requirements in the UK by 3.2%, compared to 16% in the US.”
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