The British government shared plans to loosen so-called “ringfencing” rules for the country’s banks, the Financial Times reported Monday (May 18).
The rules require banks to keep their retail business separate from potentially riskier activities, the report said.
Lucy Rigby, chief secretary to the Treasury, said the planned modifications to one of the main limitations enforced on banks following the 2008 financial crash would “unlock finance for growth” by freeing up 80 billion pounds (about $107 billion) of additional lending, while still upholding key protections against a crisis, according to the report.
Banks had pushed for the government to eliminate the rules, arguing they are too costly and harm competition, the report said.
The regulations, put into effect in 2019, are designed to safeguard deposits from retail consumers and small businesses by requiring major lenders to place them within legal entities with higher levels of capital and restricted activities.
The system keeps banks from using money from retail depositors in the United Kingdom to pay for complex and risky activities, such as financing hedge funds, trading in complex derivatives or lending to companies in riskier regions such as China.
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“Where financial systems are inefficient, we will change them,” Rigby said, per the report. “This will unlock finance for growth while keeping the U.K. banking system resilient, competitive and fit for the future.”
The rule applies to banks with at least 35 billion pounds in customer deposits and affects the U.K.’s five largest banks, including Lloyds, NatWest, Barclays, HSBC and Santander, according to the report.
Mark O’Donovan, head of international consumer banking at JPMorgan Chase, said the proposals are a “positive development as we continue to grow our presence in the U.K.,” per the report.
JPMorgan could be covered by the ringfencing rules if its U.K. retail bank continues to expand, the report said.
In other news from the banking world, PYMNTS wrote last week about the shift among financial services firms from experimenting with artificial intelligence to “operationalizing it at scale, and in the least visible parts of the enterprise, including the core systems that determine how work gets done.”
