Challenger banks judged winners in IT ahead of key Treasury meeting on surcharge

Challenger banks have the edge over high street lenders when it comes to IT, industry executives said today, four days ahead of a crucial meeting with the Treasury over George Osborne's new bank surcharge.

Just over three-quarters of banking sector executives said the likes of Metro and Virgin Money have newer and simpler IT and infrastructure, Interim Partners - a provider of experienced executives for short-term roles - said today.

The vote of confidence comes just weeks after embarrassing IT glitches hit both Royal Bank of Scotland and HSBC and delayed customer payments.

“While established banks have been investing in fintech in order to stay at the forefront of technological advances and stave off competition from challenger banks, they are often hampered by having to redesign, update and integrate labyrinthine legacy systems,” said Angela Hickmore, a partner at Interim Partners.

The bosses of Britain’s challengers will meet the Treasury’s director-general of financial services Charles Roxburgh on Friday over the new surcharge unveiled in George Osborne’s Budget.

Under the measure, lenders making profits of more than £25 million a year will have to pay an 8% corporation tax surcharge.

New banks such as Aldermore, Virgin Money and OneSavings are on course to make profits of more than £100 million this year or next.

The tax will partly replace the bank levy on international balance sheets, which had prompted the likes of HSBC to consider moving their headquarters abroad.

Instead, banks will pay the levy only on their UK balance sheets.

Challenger banks and building societies say the change will punish them disproportionately and jeopardise government efforts to increase competition in the sector.

Paul Lynam, chief executive of Secure Trust Bank, has branded the surcharge “utterly counterproductive”.

He said: “The big banks are subsidised to the tune of billions of pounds a year because of ‘too big to fail’. With the surcharge, the playing field is even less level.”

Nationwide has said the tax will cost it £300 million over five years, which could have provided the equivalent of a further £10 billion in lending.

Challenger banks have also written to MPs in constituencies where they are based warning that the tax could have an impact on local jobs.