UK SMEs need more foreign banks

The Independent Commission on Banking led by Sir Jon Vickers is being urged by small businesses to create a playing field that is level for foreign banks so they can enter the UK market.

The Federation of Small Businesses (FSB) says the urge to get new entrants into UK like NBNK Investments and Virgin Money risks overlooking the possibility of the potential foreign competition that could help to ease a very difficult and tough SME environment for lending.

FSB spokesman Andrew Cave said the group has spoken to over six large banks in America, Europe and beyond who have said they would be interested in entering the UK market. However they are put off by certain issues that we think should be looked at by the Independent Commission on Banking.

One of the issues that is quite major is the regulators insistence that overseas banks that want to start a new product here have to hold more capital to support them than those local home grown banks would need.

It therefore makes it easier if an existing bank that wants a new product but a new foreign bank has to hold additional capital in order to underwrite the project. That is no incentive at all for them to come.

Honestly, it seems the regulators trust existing UK banks more and we want this to be considered by the ICB. The FSB says the problem can be solved either by amending the rules so no extra funding is needed by foreign banks or the same is applied to our existing banks.