Challenger banks are small, recently created

retail bank Retail banking, also known as consumer banking or personal banking, is the provision of services by a bank to the general public, rather than to companies, corporations or other banks, which are often described as wholesale banking. Banking servi ...

s that compete directly with the longer-established banks in the UK, sometimes by specialising in areas underserved by the "big four" banks (

Barclays Barclays () is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services. Barclays traces ...

HSBC HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tri ...

Lloyds Banking Group Lloyds Banking Group is a British financial institution formed through the acquisition of HBOS by Lloyds TSB in 2009. It is one of the UK's largest financial services organisations, with 30 million customers and 65,000 employees. Lloyds Bank w ...

, and

NatWest Group NatWest Group plc is a British banking and insurance holding company, based in Edinburgh, Scotland. The group operates a wide variety of banking brands offering personal and business banking, private banking, investment banking, insurance and ...

). As well as new entrants to the market, some challenger banks were created following divestment from larger banking groups ( TSB Bank from

) or wind-down of a failed large bank (

Virgin Money Virgin Money is a financial services brand used by two independent brand-licensees worldwide from the Virgin Group. Virgin Money branded services are currently available in Australia and the United Kingdom. The brand formerly operated in South Af ...

from

Northern Rock Northern Rock, formerly the Northern Rock Building Society, was a British bank. Based at Regent Centre in Newcastle upon Tyne, United Kingdom, Northern Rock was originally a building society. It demutualised and became Northern Rock bank in ...

). The banks distinguish themselves from the historic banks by modern

financial technology Fintech, a portmanteau of "financial technology", refers to firms using new technology to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, blockchain, cloud computing, and big data are ...

practices, such as online-only operations, that avoid the costs and complexities of traditional banking.

History

Prior to changes in the regulatory landscape in the UK financial services industry, setting up a new bank, with a full UK banking licence, was extremely expensive and time-consuming. This led to a very small number of banks dominating the UK market—the so-called Big Four—with virtually no competition at all. Indeed, when Metro Bank received their license in 2010, it was the first new high street bank for 100 years. In the wake of the 2008 financial crisis, it was decided to open the market up to new banks. After a period of consultation, the regulation to enable this formed part of the

Financial Services Act 2012 The Financial Services Act 2012 is an Act of the Parliament of the United Kingdom which implements a new regulatory framework for the financial system and financial services in the UK. It replaces the Financial Services Authority with two new re ...

, which came into force on 1 April 2013. A summary and assessment from

Harvard Law School Harvard Law School (Harvard Law or HLS) is the law school of Harvard University, a private research university in Cambridge, Massachusetts. Founded in 1817, it is the oldest continuously operating law school in the United States. Each class ...

can be accessed online. To assist new firms to enter the banking market, the PRA, part of the

Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of ...

, set up their New Bank Start-up Unit which guides firms through the process from an expression of interest, through the application process, to 'authorisation with restrictions' if appropriate, and finally to those restrictions being lifted and the firm being granted a full banking license. In July 2014, the PRA, together with their co-regulators, the

Financial Conduct Authority The Financial Conduct Authority (FCA) is a financial regulation, financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry. The ...

published a review of the requirements, one year on.

List of challenger banks

This list contains companies that received authorisation from the PRA to operate as banks in the UK.

External links

List of authorised UK start-up banks
, by the

References

Banks of the United Kingdom Online banks {{UK-bank-stub

History

List of challenger banks

See also

External links

References