Presentación resultado y prueba de hipótesis

Year Authorised Withdrawn Refused Total

2005 2 1 0 3

2006 11 0 0 11

2007 9 0 0 9

2008 2 7 0 9

2009 5 1 0 6

Source: FSA data

5.26 While there is no clear trend in the number or success rate of licence applications over this period, the high number of withdrawals in 2008 is notable. The FSA has indicated that five of these seven withdrawals related to issues emanating from the global banking crisis, while two related to firms which immediately resubmitted their applications.

5.27 In addition to the 38 applications for a banking licence, between 2005 and 2009 there were six applications for a variation of permission that would allow the authorised firm to accept deposits. Only one of these applications was granted, while five were withdrawn. The reasons for these withdrawals included issues relating to the global banking crisis,

serious firm-specific issues that emerged during the application process, and inadequately prepared applications.

5.28 The FSA fee for a de novo banking licence application is £25,000, while the fee for a variation of permission to become a bank is £12,500.¹¹² For a change of ownership no application fee is charged. The level of these fees, if any, is comparatively small and we have not received evidence to suggest that the cost of applying for a banking licence has deterred entry.

5.29 In addition to these application fees, an applicant is likely to incur consultancy and legal fees during the course of its application, in order to ensure that its business plan is robust and that it complies with all legal and regulatory requirements. The applicant will also require sufficient funds to sustain the firm during the application process and any period between authorisation being granted and it becoming profitable. We have not received evidence to suggest that these costs are so significant as to constitute barriers to entry.

5.30 However, while the cost of obtaining a banking licence is not regarded as prohibitive, a number of potential entrants have indicated that the process for obtaining a banking licence can be unclear and uncertain. In particular, applicants with unconventional business models have argued that little guidance is available on how licensing requirements might be interpreted in their particular cases. Also, a number of parties have suggested that there is very little up-front information available on the FSA licensing process which makes it hard to make well-informed decisions about whether to apply and how to present an application.

5.31 One particular issue regarding the process that has been raised is that potential entrants have found themselves in a 'catch 22' situation. They are unable to obtain a banking licence without making capital

investments (for example on IT systems) to meet licensing requirements, but have had difficulty in raising the capital required without some

112 If a firm re-applies for a licence it must pay the same fee as for its original application.

assurance that this would lead to them becoming licensed. Even for those entrants that are able to overcome this 'catch 22' situation, because this capital expenditure must be made before a licence is granted, these investments have sat unused for a considerable period while other aspects of the authorisation process are completed.

5.32 Concerns have also been raised over the overall length of the processes, the different statutory timescales to reach decisions (as set out in

paragraphs 5.22-5.23 above). One specific concern raised in relation to this was that the FSA lacked the appropriate technical expertise to scrutinise new entrants' ICT arrangements, which could also lead to delays in the process. A further concern was raised over the FSA's ability to 'stop the clock' during the process, for example when examining the credentials of potential approved persons.

5.33 A small number of respondents indicated that the uncertainty, length of time of and cost of the application process had proved insurmountable and that they had decided not to apply for a licence. Others had

proceeded with an application but had experienced delays in the application process, or had revised their business plans in order to reduce the time taken to gain a licence (as distinct from changing the business plan in order to meet licensing requirements).¹¹³ Overall, therefore, it appears that certain aspect of the process may have acted as barriers to entry and that this may have led to a detrimental impact on the price, quality and range of products available to customers.

5.34 It is too early to tell whether the changes introduced recently introduced by the FSA and outlined in paragraph 5.17 with Figure 5.2 above have reduced the extent to which current and future applicants will face the barriers outlined above. However, we consider the changes to be

113 We understand that a number of these concerns relate to licence applications that were in progress during 2008 and 2009, when banking regulation was undergoing significant reform in response to the financial crisis and before the FSA introduced formal pre-application discussions.

In at least one case, the FSA changed its licensing requirements while an application was in progress, requiring the applicant to make unanticipated changes to its business model.

positive and to have the potential to address many of the concerns raised by respondents. For example, the regulator's willingness to issue a letter in appropriate circumstances stating that it is minded to grant a licence if certain conditions are fulfilled is likely to make it easier for an applicant to persuade investors to provide the funding that would enable it to fulfil these conditions. The impact of these changes would merit monitoring.

5.35 It is also possible that further measures could be introduced to improve the transparency and ease of use of the information that is available to applicants. For example, we understand that it is sometimes difficult to locate and comprehend those parts of the FSA Handbook that explain the requirements and procedures for authorisation. Additionally, while the 'Helping You Apply' section of the FSA's website contains much useful information for potential applicants, we understand that it does not list all the requirements of which applicants should be aware. Other relevant information may be found elsewhere on the website, such as in speeches given by FSA directors, although this may not be readily apparent.