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HIGHLIGHTS
- FCA has asked new or ‘challenger’ banks to improve their assessment of financial crime risk.
- Most of these challenger banks are digital-only and offer services through smartphone apps.
The UK's banking industry is dominated by four players, called the Big Four--HSBC, Lloyds, Barclays, and NatWest. In the past, several new banks have attempted to dent the hegemony of the Big Four but have failed. There were expectations that these challenger banks, many of which are digital-only and offer financial services through smartphone apps, will eat away a major chunk of current accounts from these dominant players. However, most of them have failed to make a significant impact.
On Friday, the country's financial regulator, the Financial Conduct Authority (FCA), called upon the challenger banks to improve their assessment of financial crime risk, saying that some of them have failed to adequately check the income and occupation of their customers. It added that there were instances when the banks didn't have risk assessments in place to prevent financial crimes.
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Expressing concerns over the adequacy of checks conducted by the challenger banks while onboarding new customers, the financial regulator said that it identified a rise in the number of Suspicious Activity Reports (SAR) reported by these banks in a review conducted over 2021. A total of six challenger retail banks were included in the review that primarily consists of digital banks and has a customer base of over 8 million.
Apart from the criticism, the FCA also hailed how these challenger banks are using smarter technology and more up-to-date IT systems to quickly identify and verify their customers.
The FCA further noted that challenger banks are a key part of the country's retail banking. However, there cannot be a trade-off between quick and easy account opening and robust financial crime controls, it added.
Let us take a look at two of the big players in the UK's banking industry and their stock performance.
1. Barclays Plc (LON: BARC)
Barclays Plc is a UK-based multinational bank that offers financial services across the globe. Recently, the bank announced that it will hike the wages of its lowest-paid workers by at least 21%.
Barclays has a current market cap of £25,153.07 million and its shares have given a negative return of 18.80% to the investors over the past year. The year-to-date performance has not been very good either and the return currently stands at -21.53%. Shares of the FTSE100-listed bank were down by 2.27% at GBX 146.66 at 2:19 pm GMT+1 on 22 April 2022.
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2. NatWest Group Plc (LON: NWG)
NatWest Group Plc is a leading banking and insurance holding company in the UK and operates various banking brands that provide personal and business banking, insurance, and corporate finance. Last month, the company announced a £1.2 billion share buyback from the UK government following which, NatWest will regain majority ownership in the company after a wait of 14 years.
The FTSE 100 constituent has a market cap of £23,956.03 million at present and its stock price has appreciated by 15.70% in the last one year. The year-to-date return, however, is in the negative territory and currently stands at -1.06%. Natwest's shares were down by 1.37% at GBX 223.30 on 22 April 2022, 2:38 pm GMT+1.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
