Small banks urge Bank boss to help them inject £28bn

Lenders have urged Andrew Bailey to relax tough rules on small banks to unleash an extra £28billion of lending.

TSB, the Co-operative Bank, and Metro Bank are among those that have written to the Governor of the Bank of England, calling for the rules to be made fairer.

In the letter, seen by The Mail on Sunday, the banks warn that small lenders are hit hardest by the regulation, putting them at a massive disadvantage to their biggest high street rivals. 

Plea: TSB, the Co-operative Bank, and Metro Bank are among those that have written to the Governor of the Bank of England

The rule requires banks to have a bigger capital safety net once they reach a certain size, in case they collapse, to avoid a repeat of the financial crisis. It means banks have to issue special bonds with high interest, making it expensive.

This kicks in once banks have made £15billion of loans or have more than 40,000 current accounts.

The letter, also signed by digital start-up Monzo, said the rules ‘harm competition and the ability to deliver for customers and businesses’.

It said easing the rule slightly ‘could unlock between £24billion to £28 billion in additional lending capacity over the next five years.’

The banks warn that the UK’s regime is tougher than those in the US and Europe, making it less attractive to build a bank in Britain. They are urging the Bank of England and Treasury to ease the rule, and focus more on ‘competition’ to give customers choice in banking.