Rachel Reeves, the chancellor, has told bank bosses she is “open-minded” about reforming the industry’s ring-fencing regime amid a concerted push to abolish the most significant regulatory burden introduced after the financial crisis.
Sky News has seen a letter sent last week by Ms Reeves to the chief executives of a quartet of Britain’s biggest banks, in which she acknowledges their view that adjustments to ring-fencing – which creates a firewall between groups’ investment banking and retail operations – “have not gone far enough”.
“As I have said previously, I am open-minded about the case for further reform,” the chancellor told the CEOs of HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK.
“My officials are considering the issues you have raised and they will reach out to your teams to discuss further.
“Banking is at the heart of the UK’s financial services sector and plays a vital role in supporting growth across the UK economy and will be crucial to the success of the government’s industrial strategy.
“If we want the UK to grow, we need a thriving banking sector and creating the right environment for that is a top priority for me.”
While Ms Reeves’s response to the bankers stops short of explicitly signalling a willingness to abolish ring-fencing, industry sources believe the Treasury now recognises that there is a clear case for an overhaul of a system which cost billions of pounds to set up.
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Of the five banks subject to ring-fencing, only Barclays has openly argued in favour of its retention, with its rivals all arguing that the regime creates capital inefficiencies which inhibit lending into the British economy.
The chancellor’s letter comes amid a push by her – along with the prime minister and business secretary – to amend the remits of economic regulators to give them explicit growth objectives.
In recent months, the Payment Systems Regulator has been scrapped and folded into the…
