FSB: More competition needed in banking
Jul 29 2011
The FSB has long called for more competition in the banking sector
The banking sector needs more competition, rather than lending targets, to give small firms a better deal, says the Federation of Small Businesses (FSB).
Banks that specialise in small business lending are needed as part of a drive to increase competition in the banking sector and would boost lending to the smallest firms, says the lobbying group.
More than a decade since the Cruickshank Report said that more competition was needed in the banking sector, the number of banks in the UK has fallen by 20 per cent, according to figures analysed by the FSB.
The FSB has long called for more competition in the banking sector. The credit crunch and the subsequent squeeze on the banks have lead to a further reduction in the choice of banking services for small firms.
The business organisation believes that the Independent Commission on Banking's (ICB) proposal to separate the investment and retail divisions of banks will help small businesses to get a fairer deal.
However, while structural change is needed to help stability to prevent another ‘credit crunch', more competition will be vital for the long term future of the economy.
FSB national chairman John Walker says that even though Santander now has a small percentage of the small business banking market, the main four banks actually hold a larger share of the market than they did 10 years ago.
‘The lack of competition in the sector is the most important thing that the ICB should focus on in its full report in September. The lack of competition gives small businesses less choice, and it also means that the cost of finance is more expensive.
‘Allowing new or even specialised banks to buy branches from the state-owned banks would boost competition on the high street, helping to drive down costs and gives the smallest of businesses a fairer deal.’
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