An evaluation of reducing barriers to entry into the UK banking sector

In this paper, we evaluate the impact the 2013 review by the FSA and the Bank of England has had on reducing the barriers to entry for firms entering the UK banking sector, and the benefits it has generated for consumers.

Read Evaluation Paper 18/3 (PDF)

We have published the third of a new series of evaluations of our past interventions. We committed to these in our Mission.


In April 2013, the Bank of England and FSA introduced reforms to the authorisations process and a shift in approach to the prudential regulation of banking start-ups.

We expected that these changes, taken together, would reduce some of the barriers to entry into the banking sector and, as a result, enable an increased competitive challenge to existing banks and benefits to consumers across a range of products.

Our evaluation found

  • There is a more efficient authorisations process: the time taken to assess firms’ applications has reduced by 3 months.
  • The rate of entry into the UK banking sector is higher than before the 2013 review. While not all entry can be solely attributed to the changes in the authorisations process, firm interviews have indicated that the interventions have encouraged entry into the UK banking sector.
  • The increase in entry has in turn led to a greater range of product offerings in the retail market and benefits for consumers. For example, mortgage borrowers of post-review entrants saved about £3m in interest payments in the first year of their loans when comparing charges on similar mortgages in 2017.
  • However, there has not yet been a substantial change to concentration in the retail banking sector, nor do we have evidence of significant competitive responses (e.g. more attractive borrowing rates) by incumbent banks.

We have identified some lessons that we can apply to current and future work. Particularly, ease of entry is a necessary but not sufficient condition for healthy competition. It takes time for lowering barriers to entry to affect market shares in the banking sector in a significant way because there may be other barriers to firms expanding to a more significant scale.

Read more about the effects of our intervention in our Evaluation Paper 18/3.

For further details, you can read our Technical Annex to the report.

You can also read about our Ex post Impact Evaluation Framework.