Labour's Miliband calls for big UK bank sell-off

Mon Jul 9, 2012 11:07am EDT
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By Matt Scuffham

LONDON (Reuters) - Britain's opposition called on Monday for the country's big five banks to be forced to sell hundreds of branches to create at least two major competitors by 2015 and for regulators to make it easier for new retail banks to emerge.

The proposal comes as Britain's politicians argue over how best to respond to an interest rate rigging scandal that reignited public anger towards banks which many people blame for sinking the economy into recession.

"Let's break the dominance of the big five banks. Let's turn five into at least seven so there is proper choice for the consumer," Ed Miliband said in a speech at the Co-operative Bank's headquarters in London.

"The quickest way to do that is to force existing banks to sell off hundreds more branches to create the space needed for a challenger to thrive."

For years, Britain's banking system has been dominated by a handful of large lenders but many individuals and small companies say they are unable to access credit.

New entrants have already begun to emerge in the wake of the 2008 financial crisis, looking to fill the gap as the big banks focus on shrinking their balance sheets and building up capital reserves to meet new regulations.

However, barriers to entry are seen as prohibitive and new challengers must meet stringent criteria to convince regulators they have the required capital, IT infrastructure and management expertise.

Labour's finance spokesman Ed Balls wants regulators to be more open to new entrants into retail banking and to make it easier for existing "challenger banks" to grow more quickly.   Continued...