A cross-party group of MPs has published a report highlighting gaps in the way government and regulators dealt with challenger banks and building societies during the COVID-19 crisis.
The All-Party Parliamentary Group on Challenger Banks and Building Societies (APPG CBBS) surveyed UK-based firms to assess the impact of the pandemic and the government and regulatory response.
They reported that regulators seemed confused about the business models of many smaller institutions and that much of the focus of government and regulators were on large firms alone.
Challenger banks and building societies risked being overlooked by government and the regulators during the lockdown, with policy being shaped with large institutions in mind and the effect on smaller institutions being overlooked. At no stage were challenger banks consulted on government policies that affected them, particularly the mortgage payment holiday scheme.
There was also criticism of the tendency to make snap policy announcements and expect all firms large and small to implement these instantly. A third (33%) of institutions have had to furlough staff, and most institutions now have between 50% and 90% of staff working remotely.
“The survey results show that challenger banks and building societies have stepped up to the challenge of supporting their customers during the coronavirus but that government and the regulators have struggled to provide guidance and support for the sector that is fit for purpose for smaller financial institutions,” said Rt Hon Karen Bradley MP.
“The APPG has long called for bespoke regulation and recognition within government and the regulators. This crisis lays bare why this reform is both needed and long overdue.”