The Government is committed to competition and diversity in financial services and would like to see firms with a range of business compete and succeed.
The Government has supported both the Peer-to-Peer (P2P) and Crowdfunding sectors, which provide alternative sources of finance for both businesses and individuals, by introducing a proportionate regulatory regime as well as other policies, such as the inclusion of P2P loans in ISAs.
The Small Business, Enterprise and Employment Act 2015 contained two policies to support Small and Medium-sized Enterprises (SMEs) in accessing finance. The first requires the major banks share information on their SME customers with other lenders through designated Credit Reference Agencies. This will improve the ability of challenger banks and alternative finance providers to conduct accurate risk assessments and level the playing field between providers. The second requires major banks to refer SMEs they reject for finance, with the SMEs permission, to ‘finance platforms’ that can match SMEs with alternative finance providers.
The Government has established the British Business Bank to support the development of diverse finance markets for smaller businesses in the UK. The British Business Bank’s £950m Business Finance Partnership aims to diversify the sources of finance available to smaller and mid-sized firms and reduce their dependence on bank finance. £863m has been allocated to funds supporting mid-sized firms, with £333m already invested alongside private money, generating over £1bn of lending to businesses.
The Government has also continued to support the building societies sector through a number of measures including: carving out building societies from the Independent Commission on Banking ring-fencing regulations, extending ISA eligibility to Core Capital Deferred Shares, and applying a £25m sector-specific allowance to carried-forward losses for Corporation Tax. More recently, the Government listened to the concerns of smaller organisations, including building societies, when taking steps to remove the reverse burden of proof from the senior managers regime.
The Government has also taken significant steps to support the credit union sector by investing £38m in the sector through the Department of Work and Pensions’ (DWP) Credit Union Expansion Project, changing legislation to allow credit unions to admit corporate members, providing £500,000 to help armed forces personnel access credit union services and launching a Call for Evidence which allowed all credit unions, regardless of size or influence, the opportunity to contribute their vision for the future of the sector to the wider debate.