The Bank of England is preparing to relax certain aspects of Britain’s bank ring-fencing regime, while pushing back against a more sweeping overhaul sought by lenders, according to sources. The central bank aims to preserve key safeguards as the government undertakes a broader review of the rules.
Under the ring-fencing framework—one of the flagship post-financial crisis reforms—banks with large retail operations must separate everyday banking services from riskier activities such as investment banking to protect depositors and taxpayers in the event of a crisis.
In July, British finance minister Rachel Reeves pledged to deliver “meaningful” reform as part of the government’s drive to cut red tape and stimulate economic growth.
The rules apply to banks holding more than £35 billion ($46.1 billion) in retail deposits, covering major lenders including Lloyds, NatWest, HSBC, Barclays and Santander UK. Critics argue that ring-fencing undermines Britain’s global competitiveness and that loosening the regime would release capital for additional lending.
Banks have been lobbying the Treasury—which has final authority over substantial changes—to allow them to access part of the £35 billion that non-ring-fenced entities can currently use to fund activities such as investment banking, according to people at two of the lenders.
