London - Britain’s regulators have given the green light to five new banks since easing rules a year ago for entrants to challenge the handful of lenders who dominate the high street.

The Bank of England and the Financial Conduct Authority said yesterday that more than 25 other potential banking applicants had been interviewed as regulators faced pressure from legislators to increase competition in banking.

Opposition Labour Party leader Ed Miliband has said he would consider limiting the market share of big banks should his party come to power in next year’s election as scandals at top banks sparked calls for more competition.

Just five banks – HSBC, Royal Bank of Scotland, Barclays, Lloyds and Santander UK – still account for more than three-quarters of lending despite several challengers entering the market in recent years.

The five new banks that have just been authorised are Axis Bank, Union Bank of India, FCMB, UBA Capital and Paragon Bank.

They join other recently launched names like TSB, which was spun off from Lloyds last month and is emerging as a credible challenger with 4.5 million customers, as well as Virgin Money and retailer Tesco, Aldermore and Shawbrook.

Back in 2010, Metro Bank became the first new lender to emerge for over a century, highlighting the difficulty of launching a new bank.

Regulators have since made it easier for new banks to get off the ground, relaxing some rules in March last year, while insisting basic safeguards remain in place, such as protections on customer deposits.

A new bank now needs only £1 million (R18m) in capital, compared with the previous minimum of £5m. Authorisation of top officials has also been fast-tracked.

“It is clear that the changes introduced last year have been positive for new entrants and will make a contribution to increasing competition and thus benefit customers,” Andrew Bailey, the chief executive of the Bank of England’s Prudential Regulation Authority, said.

In the latest pre-application meetings, regulators met more than 25 potential lenders, which ranged from retail to wholesale banking and payment services firms.

“In any sector newcomers to the market bring fresh thinking and challenge established firms to consider how they can offer a better deal or improve the service they offer,” said Martin Wheatley, the chief executive of the Financial Conduct Authority.

Andrea Leadsom, a junior UK finance minister, said regulators were meeting the challenge set by the government to raise competition in banking.

“Critical to our long-term economic plan is getting new banks into the marketplace, and… we are doing that,” Leadsom said.

Separate steps to increase competition have been introduced, such as making it easier and free to move a bank account and the setting up of a new regulator to oversee bank payments systems. – Reuters