Building a Challenger Bank
The process of building a challenger bank is not an undertaking for the faint-hearted. Hampshire Trust Bank have experienced first-hand the long and winding road to achieving challenger status.
In the wake of the financial crisis, the government is focused on increasing competition in the UK banking industry. However, while the process of setting up a new bank has been made simpler by the Prudential Regulatory Authority and the Financial Conduct Authority, building a challenger bank is not an undertaking for the faint-hearted.
Barriers to entry to the UK banking industry remain. Regulators have to balance the objective of increasing competition with their primary focus, which is safeguarding the financial system and the conduct that goes on within it. It’s interesting to note that prior to Metro Bank being launched in 2010, there had not been a single new high street bank licence granted in 100 years.
So, how do you go about building a new challenger bank?
There are essentially two ways to achieve authorisation – either prepare a de novo application to set up a brand new bank or acquire another bank, as was the case with us and Hampshire Trust. Both options are likely to take a similar approval time.
Navigating the regulatory landscape is just one component of approval. As with any new venture, the development of a business plan, with the necessary supporting information, is all important. It should be kept as short and simple as possible.
As you would expect, a strong financial plan which includes capital and liquidity resources is also crucial as it demonstrates that the business is viable and capable of delivering returns. In addition, documentation and plans are needed for business areas such as risk and compliance, HR and IT, and all of these must be developed in line with regulatory requirements.
Once the plans are in place
Once you have your plans in place, you need committed investors, a strong board and the specialist human resources required to build your business. Getting people to join you before you have authorisation is not easy but it does mean that you have a committed workforce from the start.
Our own journey to achieving challenger status took about two years. In May 2014, authorisation was granted and our new board and senior team appointed. We’re just over a year into our journey and I’m delighted to say that we are ahead of target and in a strong position for future growth.
We believe that ‘one size fits all’ banking has no place in today’s business world and we’re working hard to deliver specialist support and create a portfolio that continues to meet the changing needs of British businesses.
Looking ahead, we will build on this strong foundation, deepening and broadening our core business lines of asset finance, commercial finance, property finance and personal and business savings. We will continue to deliver lending solutions that help realise the ambitions of businesses countrywide and we look forward to working with new and existing customers.
Chief Financial Officer, Hampshire Trust Bank
Ketan has over 30 years’ experience in financial services and joined Hampshire Trust Bank as Chief Financial Officer in May 2014. He was previously Chief Operating Officer and Finance Director of Heritable Bank and was also the Finance Director of Sun Bank Plc for twelve years, from its inception until 2001. Ketan is a graduate of the University of Leeds and is a Fellow of the Chartered Association of Certified Accountants.