“Challenger banks” are gaining support under government proposals to lower barriers for entry and create a fairer, more balanced market.

Andrea Leadsome, the economic secretary to the Treasury, outlined in a speech to the British Banking Association (BBA) yesterday, plans to support challenger banks and boost lending to SMEs.

She said:

“We are legislating to require credit data sharing to enhance challengers’ ability to conduct risk assessment of SMEs.”

An agreement has been made with large banks to disclose lending data by geographical location to help challengers identify exactly where help in needed.

The government plan to create a “more level playing field” for challenger banks, while helping SMEs gain access to better finance and financial guidance, Ms Leadsome said.

Other steps taken include matching SMEs who want loans with challenger banks and other finance providers and working in detail with lenders to identify how the system is helping the greater economy and where there is room for improvement and a lack of lending.

Ms Leadsome said it is also “fundamental that businesses should be able to rate their bank” in a “trip advisor” style rankings. Providing a more transparent financial system.

Aside from businesses, serving individuals must be at the heart of banks’ operations, Ms Leadsome added.

Labour shadow secretary to the Treasury, Cathy Jamieson, said Labour had plans to support the launch of at least two challenger banks and a “market share” test.

Photo by Paresh Gajria