The Prudential Regulation Authority (PRA) only approved four applications for banking licences in the last year, down from 14 in the previous year, while the number of applications (11) has remained virtually unchanged from last year (10).
According to regulatory consultancy fscom, the fall in approvals suggests that the PRA is taking longer to approve new applicants for banking licences than in the past, with many of the recent wave of applicants for banking licences coming from digital-only challengers and FinTechs.
The figures come in the wake of a letter from the PRA to chief executives of challenger banks in mid-June, which outlined the regulator’s concerns about their risk management.
While the PRA is still keen to approve new entrants to the sector, fscom stated there are three key factors that all applicants for banking licences must address to give themselves the best chance of getting approval.
They must ensure boards have sufficient experience in banking - through at least one economic cycle - as many are made up of members from a tech background.
James Borley, director at fscom, commented: “The regulator is keen to see that the leadership team at a new bank has experience of lending through at least one economic cycle, and can manage a loan book in a period with potential for higher defaults – there is also a need for individuals with experience ensuring compliance in what is a very tightly-regulated industry.”
Separate analysis from Fitch Ratings this week also suggested that several digital challengers have grown faster than the market, during relatively benign credit conditions in recent years, with performance not yet tested in a downturn - with the warning that such FinTechs could be in for a shock if the economy hits a downturn.
Challenger banks must also prove their business model to the regulator, and back it with data.
Borley gave the example that it has been proven to be quite tough to get consumers to switch their main current accounts to a challenger bank. “How will the bank deal with this? The regulator will be keen to see an answer that is backed by data.”
Finally, FinTechs must make sure they have the investment needed to meet capital requirements, in order to protect potential customers.
Borley concluded: “The PRA operates with a presumption towards increasing competition in the banking sector, and is keen to see new banks enter the market.
“Potential applicants should be aware that none of the regulator’s challenges are insurmountable – the right preparation can ensure the process runs smoothly.”
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Figures from the National House-Building Council saw Q1 2025 register a 36% increase in new homes built across the UK compared with the same period last year, representing a striking development for the first-time buyer market. But with the higher cost of building, ongoing planning challenges and new and changing regulations, how sustainable is this growth? And what does it mean for brokers?
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Content editor, Dan McGrath, sat down with chief operating officer at Black & White Bridging, Damien Druce, and head of development finance at Empire Global Finance, Pete Williams, to explore the role of the bridging sector, the role of AI across the industry and how the property market has fared in the Labour Government’s first year in office.
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In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance, to explore how regional trends are redefining the UK housing, mortgage and buy-to-let markets.
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In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance.
In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance.
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