According to the founder of Metro Bank, Anthony Thomson, there could be as many as 15 new banks opening their door to customers in the UK in less than half a decade. Thomson launched his own Metro Bank in 2010, with backing from US banking entrepreneur Vernon Hill, making it the first corporation to be awarded a full banking licence since the 19th Century.
Thomson was talking to delegates at the Future for Regional Banking conference in Newcastle where he outlined his vision of a series of regionally-based banks which would then expand their reach organically to become national corporations. An announcement was made in March that the amount of capital necessary to start a bank will be relaxed in order to stimulate competition and remove the barriers to entering the market that new competitors face. Since the financial crisis of 2008, there have been a series of public blunders which have shaken consumer confidence in the banking system. Many of banking corporations were found to have mis-sold payment protection insurance or even signed up customers without their knowledge, while others were near potential meltdown.
Some institutions, like Northern Rock, became nationalised by the UK government while the Irish Government chose to nationalise Anglo Irish Bank and bring in banking expert Mike Aynsley as the CEO of its newly named Irish Bank Resolution Corporation Limited. While this decision was criticised by some, the nationalisation process pulled the banks from the brink of potential collapse and Aynsley successfully reduced potentially toxic asset portfolios from €115 billion in 2008 to around €14 billion by the end of last year. Thus far, however, the ‘Big Five’ banks still control the vast majority of money in the UK despite Lloyds-Halifax and RBS-NatWest being part owned by the taxpayer.
Over the last four years, the banks have been solidifying and preserving their assets while the suggestion is now that they should be looking to future growth initiatives in order to stimulate growth in the economy they damaged. The UK government is now putting pressure on the banks to commence lending to small firms and mortgage borrowers, particularly first-time buyers through schemes like ‘Help to Buy’. With new initiatives and encouragement for smaller businesses, it may provide the catalyst for a flurry of smaller banks which are able to better serve the needs of local people who have lost trust in the sector. Whether these firms can match the rates and offerings from their international competition remains to be seen.