Barriers to challenger banks or p2p lenders looking to enter and compete within the lending market are still sky-high.
That is the opinion of Sheldon Mills – Senior Director of Policy at the Office of Fair Trading. This news comes off the back of contradictory claims from Financial Secretary to the Treasury Sajid Javid, at last week’s P2PFA annual conference. Mr. Javid claimed that the lending market is now a competitive environment – and one that is at least partially responsible for ensuring high quality lending.
But Mr. Mills is of a different opinion:
“Most of the competition studies into the financial services sector have found significant problems. It is interesting the Treasury financial secretary says we may well have solved these problems - I do not think I would agree with that.
”It is safe to say, in our new study on SME we are still finding longstanding concerns. The banks are still a concentrated market and that has not changed in the past decade.”
Barriers to entry are chief among the OFT’s concerns:
“We still find you face certain barriers to the effective provision of your services which come from the incumbent banks.
“One issue is less of a competition issue and more of an anti money laundering issue in that some of the industry are unable to get the basic bank account in order to kick off their business. The FCA maybe needs to look at this."
Mills also pointed out that the time it takes to get hold of key documentation is an issue under the current system. Loans waivers – contractual agreements that relinquish the liability of a borrower when receiving loans that may default, and deeds of priority – which agree the rights of debts and to which priority they are repaid, are two such examples.
“We do take this very seriously as it can make it very difficult for you to provide your services. We do think banks can be smarter about this.”