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ITV News
15-07-2025
- Business
- ITV News
Chancellor announces 'widest set of reforms' to investment and banking in 'more than a decade'
The Chancellor Rachel Reeves delivered the annual Mansion House speech on Tuesday evening to senior bankers and company owners. Her speech focused mainly on financial sector reforms, a package she trailed earlier on Tuesday whilst on a visit to Leeds, the city lending its name to these changes. The chancellor told business leaders her "Leeds reforms" represented the "most wide-ranging package of reforms to financial services regulation in more than a decade." Reeves said she wanted "financial services at the heart of the government's growth mission, recognising that Britain cannot succeed and meet its growth ambition without a financial services sector that is fighting fit and thriving." As part of these reforms, the chancellor vowed to review many of the systems put in place following the 2008 financial crisis, loosening these restrictions to encourage growth. These include: A government-backed mortgage guarantee scheme to encourage lenders to take more risk. A push to get savers into stocks, shifting money from savings accounts to equity markets. As it stands, just under one in five households directly hold shares. In the United States, the proportion is one in two. A wing-clipping for the Financial Ombudsman Service, reined in after years of complaints from firms that it has acted like a 'quasi-regulator'. A scaling back of the Senior Managers Regime (SMR) - the post-crisis framework that holds banking executives personally accountable for misconduct. A review of the 'ring-fencing' regime, which separates banks' retail and investment activities. The chancellor said the changes would have a "ripple effect across all sectors of our economy, putting pounds in the pockets of working people through better deals on their mortgages, better returns on their savings, more jobs paying good wages across our country." The Treasury has promised the review will look at how any changes can strike the right balance between growth and stability, including protecting consumers' deposits. The reforms to the financial sector come alongside a push to promote greater investment by individuals. This includes rolling out 'targeted support' from April next year, where banks can alert customers with cash sitting in low-return current accounts about investment opportunities. The Treasury claims at current rates, moving £2,000 from these accounts to stocks and shares investments could make millions of people over £9,000 better off in 20 years' time. In a further push to increase the public's faith in stocks and shares, major banks and financial firms, including Barclays, Lloyds, Vanguard and Hargreaves Lansdown are backing a new advertising campaign highlighting the benefits of investing. The government also said it will continue to consider reforms to ISAs and savings to strike the right balance between cash savings and investment.'We are fundamentally reforming the regulatory system, freeing up firms to take risks and to drive growth,' Ms Reeves told finance chiefs when setting out the reforms in Leeds. The reforms build on changes that loosen mortgage lending rules for banks. It means more mortgages will be available at more than 4.5 times a buyer's income, which is expected to open the door to thousands more loans for first-time buyers. Reeves ended her speech, saying: "In too many areas, regulation still acts as a boot on the neck of businesses, choking off the enterprise and innovation that is the lifeblood of growth. "Regulators in other sectors must take up the call I make this evening not to bend to the temptation of excessive caution but to boldly regulate for growth in the service of prosperity across our country." Tuesday's speech is the chancellor's second Mansion House speech since taking office. Last year, the chancellor announced plans to reform pension investment and tackle risk aversion in the financial sector. The speech is an annual opportunity for the chancellor to address senior bankers and company bosses at the Annual Financial and Professional Services Dinner, held at the City of London's Lord Mayor's residence.
ITV News
15-07-2025
- Business
- ITV News
The city unleashed: Will chancellor's reforms to the financial sector roar or backfire?
Rules matter. Regulation and deregulation can both lead to profound change. On October 27 1986, a radical shift in financial regulation transformed the City of London. The 'Big Bang' introduced electronic trading and opened the doors to foreign banks, turning London into a global financial powerhouse. It made the city roar, boosted the economy, created thousands of high-paying jobs and swelled the Treasury's coffers. But the direct benefits weren't felt much beyond London and the South East. On Tuesday, the chancellor hopes to make some noise of her own. In her Mansion House speech, Rachel Reeves will unveil what she calls the 'Leeds Reforms' - a sweeping attempt to cut red tape and loosen the restraints she believes are holding back bank lending, business investment and economic growth. She will urge greater risk in the pursuit of public gain, promising a 'ripple effect that will drive investment in all sectors of our economy and put pounds in the pockets of working people.' Among the changes: A government-backed mortgage guarantee scheme to encourage lenders to take more risk. A push to get savers into stocks, shifting money from savings accounts to equity markets. A wing-clipping for the Financial Ombudsman Service, reined in after years of complaints from firms that it has acted like a 'quasi-regulator'. A scaling back of the Senior Managers Regime (SMR) - the post-crisis framework that holds banking executives personally accountable for misconduct. The SMR was designed by Andrew Bailey when he led the Financial Conduct Authority. Today, he runs the Bank of England. By convenient coincidence, the Bank has today announced its own reforms - billed as a package to maintain financial stability and support growth. Key among them: a delay. Banks will get an extra year - until January 1 2028 - to comply with key parts of Basel 3.1, a global rulebook intended to prevent future financial crises by forcing banks to hold more capital against risky assets. Smaller lenders will face a lighter regulatory load, making it easier, in theory at least, for them to grow and lend more, especially mortgages. The Bank also plans to find ways to smooth the path for younger banks like Starling and Metro to compete in the mortgage market. And the bar will be raised for which banks must draw up a 'resolution plan' - the detailed blueprint for how, in case of emergency, a bank can be wound down or rescued without hitting taxpayers. The new threshold rises from £15–25 billion in assets to £25–40 billion. The Bank of England says the timing of the announcement reflects a shared ambition to boost growth. Others may see the choreography as questionable, given the central bank's independence. City firms have long lobbied for looser rules and will welcome much of this. But critics will worry that the hard lessons of 2008, when reckless risk-taking in the banking sector triggered a global crisis, are being forgotten. Sir John Vickers chaired the Independent Commission on Banking and helped design the post-crisis rules aimed at making banks safer. He cautions not to forget the lessons of the past. 'Regulatory simplification is fine so long as the basics - including plenty of equity capital - are sound,' Vickers told ITV News. '[Banks] are sounder than they used to be, but in my view not sound enough. And on most reckonings, risk has gone up lately.' As for the 'ripple' - or trickle-down - effects of these reforms, it's worth remembering: the benefits of Big Bang struggle to reach far beyond the Square Mile. The stakes are high. Britain is in the grip of the longest economic stagnation since the 1930s. The public finances don't add up. And the chancellor's self-declared 'iron grip' on tax and spending looks flimsy. Whether looser rules can deliver stronger growth or simply repeat old mistakes remains to be seen.
