Handelsbanken - a true challenger to the big five Even independent authorities have got in on the act, with the Independent Commission on Banking calling for Lloyds to become a "strong challenger bank," despite it being one of the most dominant in the sector already. The exact notion of quite what a challenger should be is in part the problem - there is no one clear definition - while the other key problem is the failure of the numerous forced attempts to create such a challenger. As a result of the Government's bail-outs of the Royal Bank of Scotland, and Lloyds Banking Group, the European Commission mandated each to sell off a portion of its UK banking business to increase competition in the market. For RBS, some 315 branches, which will control 5pc of the SME market and have 2m retail customers, to be sold by the end of 2013. For Lloyds, some 631 branches, involving 4.6m customers, to be sold by November 2013. However, with months to go until those original deadlines, both businesses are still owned by their respective parent, and in discussion with the EC as to extensions. As regular readers of this newspaper will only be too aware, despite best intentions to sell, neither bank has had much luck in doing so. Lloyds chose the Co-op as its preferred suitor for its so-called Project Verde branches, but that deal collapsed in April this year when it emerged the mutual was nursing a £1.5bn capital black hole. RBS selected Santander to buy its parcel of "Rainbow" branches, but the Spanish-owned bank pulled out of the £1.65bn sale in October last year citing technical problems. Both banks have resorted to Plan B; Lloyds a separation of the business under the TSB brand, and a planned stock market flotation; RBS a dual-track sale and IPO process. Each plan is credible, although each is fraught with difficulties. Lloyds is reliant on sufficient demand from investors when it comes to float the TSB business for its shares. Given some of the Government's 39pc stake in Lloyds is expected to come up for grabs early next month, and with a number of other bank offerings in the offing, demand may be light. RBS faces a trickier decision, with three consortia vying for control of its branches using a number of complex and uncertain bid approaches. Were it to reject these and turn to an IPO, incoming chief executive Ross McEwan would run the same risk as his opposite number at Lloyds, Antonio Horta-Osorio. Yet amidst all this hand wringing as to how best to really create a challenger bank, and what the best option is for each of these "up for sale" units, a real challenger bank has been hiding in plain sight. Handelsbanken, as Harry Wilson reports today, has fast become a true pretender to the challenger crown. With borrowing costs lower than those of the French government, and a model that was itself devised following its own scandals, the Swedish bank has a strong balance sheet which allows it to roll-out UK branches at a pace of almost one a week. It is also something of a poster boy when it comes to a new way of banking - it follows a bottom-up approach, and its remuneration packages mean that the person behind the counter is just as incentivised as its chief executive. What is more, it is growing in scale - with 161 branches in the UK to date, 101 of which were opened in the past five years - with the prospect that it could one day grow to the same size here as it is in its native Sweden, where it has almost 1,300 branches. So, forget Project Rainbow. Step aside Project Verde. Handelsbanken is a challenger we can - and should - believe in. More public sector work must go to SMEs Owner-managed companies tend not to win Government contracts, or at least that is the belief held by many at the smaller end of the business scale. With legions of staff needed to fill in the hundreds of pages required as a result of Whitehall's lengthy tendering process, many choose not to take part for fear that the process itself could cost them dear. This is not something that has passed by those in Government, with the Coalition having a set a target of giving 25pc of its work to small and medium-sized companies. Last Tuesday, it backed up its words. Of the four companies chosen by the Ministry of Justice to operate its new GPS-led offender tagging system, Buddi was one. Buddi was founded by entrepreneur Sara Murray, is 20pc-owned by Odey Fund Management, and uses British-led technology made in Nottingham. However, on the same day that Murray and her small Aylesbury-based team were celebrating, research emerged to show that 26pc of SMEs said it was becoming more difficult to win public sector contracts. Moreover, that same research showed SMEs win just 10.5pc of public sector work. Buddi is a great example of what small companies are capable of. It's just a shame that it's just one of few out there. You can contact James Quinn about his column at James.Quinn@telegraph.co.uk and follow him during the week on Twitter at @jamesrquinn . Kamal Ahmed returns next week