Latest news with #ringfencing
Bloomberg
26-05-2025
- Business
- Bloomberg
Ring-Fencing Was a Good Idea That UK Banking No Longer Needs
UK banks want the government to abolish a key piece of post-financial crisis regulation that forces them to keep ordinary depositors' money legally separate from their trading and investment-banking business. This uniquely British setup, known as ring-fencing, limits the kind of lending banks can do and raises their costs. Well, most lenders don't like it. Barclays Plc alone is happy with the rules, which may be because it is uniquely placed to benefit from any protections they afford. I was always a big supporter of the idea behind this separation, but I'm no longer convinced the setup achieves much at all — for depositors or for Barclays.
Reuters
20-05-2025
- Business
- Reuters
Barclays and HSBC clash over repealing Britain's bank ring-fencing rules
LONDON, May 20 (Reuters) - Senior executives at two of Britain's banks disagreed over proposals to repeal the country's post-crisis bank ring-fencing rules at a hearing of lawmakers on Tuesday, with the head of Barclays UK saying it could undermine financial stability. Bosses from HSBC (HSBA.L), opens new tab, Lloyds (LLOY.L), opens new tab, NatWest (NWG.L), opens new tab and Santander UK ( opens new tab said they supported scrapping bank ring-fencing in a letter to the finance ministry last month. Changing laws that require banks to separate retail depositors' savings from banks' riskier activities would help kickstart growth, Ian Stuart, head of HSBC's domestic British bank, told UK lawmakers at the hearing. "We have two banks in the UK, a ring-fenced bank and a non-ring-fenced one, and we can't move capital between them... just being able to do that would help businesses in the UK today," he said. Such a change could however undermine financial stability and the public's trust in the sector, said Vim Maru, Chief Executive of Barclays UK, which did not sign the recent letter. The rare public disagreement by two bank bosses over a key part of Britain's post-crisis efforts to shore up the banking industry underscored the challenge facing Britain's Labour government which is desperate to kickstart economic growth. Under pressure from lawmakers, the country's financial watchdog has said it will reevaluate its approach to risk to boost growth, and its antitrust regulator has likewise been told to get behind the push for growth. The split between HSBC and Barclays over whether to unshackle Britain's banks from ring-fencing rules could in part be because of the different ways in which those banks have implemented the rules, Conservative lawmaker John Glen said at the Treasury Committee hearing on Tuesday. Barclays, in addition to its ring-fenced and non-ring-fenced entities, has created a third services unit which provides essential functions to both, reducing duplication of costs.
Times
19-05-2025
- Business
- Times
Banks' ring-fencing rules under scrutiny by City watchdog
City regulators are looking at ways to loosen one of the centrepieces of Britain's post-crisis banking reforms after the rules came under attack from the bosses of some of the country's biggest lenders. It emerged on Monday that officials at the Bank of England's Prudential Regulation Authority are examining options to relax the ring-fencing regime which came into force at the beginning of 2019. It required the UK's largest banks to legally separate their high street businesses from their riskier investment banking divisions. The aim of ring-fencing was to improve the safety of the industry by ensuring consumer deposits are protected in the event a bank collapses. However, some banking executives have long been critical of the rules, arguing that they are inefficient, trap capital
Bloomberg
19-05-2025
- Business
- Bloomberg
BOE Weighs Looser Ring Fence as Banks Lobby to Remove Rules
The Bank of England is considering ways to loosen post-crisis rules that forced banks to separate their retail and investment banking arms after a number of UK lenders called for the regime's removal. Staff at the central bank's Prudential Regulatory Authority are looking to relax the ring-fencing requirements without scrapping them entirely, a person familiar with the matter said, asking not to be identified discussing internal deliberations.
Sky News
19-05-2025
- Business
- Sky News
Reeves "open-minded" on banks' push for ring-fencing reform
Why you can trust Sky News 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. 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 City watchdog, while the chairman of the Competition and Markets Authority has been ousted amid concerns in Whitehall that it was not sufficiently focused on growth. Ms Reeves told the bank chiefs in her letter that the Treasury was prioritising "new growth-focused remits for the regulators and a commitment to look at how post-crisis regulation can be rebalanced to ensure it is proportionate and managing rather than eliminating risk". Her response will fuel expectations that the chancellor will use her speech at July's Mansion House dinner to outline prospective reforms to ring-fencing. Last week, analysts at Royal Bank of Canada said that scrapping ring-fencing would deliver a benefit to the affected banks of as much as £2.5bn, by reducing funding costs in their wholesale banking operations. NatWest, said RBC, would be the single biggest beneficiary of such a shake-up. The push for reform comes at precisely the same time as another financially and symbolically important legacy of Britain's banking crisis is set to disappear. The government's stake in NatWest is now below 1%, according to a filing last week, having stood at more than 80% after the bank's £45.5bn bailout. The sale of the remaining stake is likely as soon as next week based on the current trajectory of share sales. In their joint letter to Ms Reeves, which was revealed exclusively last month by Sky News, the quartet of bank chiefs told Ms Reeves that: "With global economic headwinds, it is crucial that, in support of its Industrial Strategy, the government's Financial Services Growth and Competitiveness Strategy removes unnecessary constraints on the ability of UK banks to support businesses across the economy and sends the clearest possible signal to investors in the UK of your commitment to reform. "While we welcomed the recent technical adjustments to the ring-fencing regime, we believe it is now imperative to go further. "Removing the ring-fencing regime is, we believe, among the most significant steps the government could take to ensure the prudential framework maximises the banking sector's ability to support UK businesses and promote economic growth." Banks spent billions of pounds designing and setting up their ring-fenced entities, with separate boards of directors appointed to each division. More recently, the Treasury has moved to increase the deposit threshold from £25bn to £35bn, amid pressure from a number of faster-growing banks. Sam Woods, the current chief executive of the UK banking regulator, the Prudential Regulation Authority, was involved in formulating proposals published by the Sir John Vickers-led Independent Commission on Banking in 2011. that the Treasury is drawing up plans to recruit a successor to Mr Woods when his second term ends next year. Legislation to establish ring-fencing was passed in the Financial Services Reform (Banking) Act 2013, and the regime came into effect in 2019. In addition to ring-fencing, banks were forced to substantially increase the amount and quality of capital they held as a risk buffer, while they were also instructed to create so-called 'living wills' in the event that they ran into financial trouble. Britain is the only major economy to have adopted such an approach to regulating its banking industry - a fact which the bank chiefs say is now undermining UK competitiveness. "Ring-fencing imposes significant and often overlooked costs on businesses, including SMEs, by exposing them to banking constraints not experienced by their international competitors, making it harder for them to scale and compete," the letter said. The four bosses called on Ms Reeves to use this summer's Mansion House dinner - the City's annual set-piece event - to deliver "a clear statement of abolish ring-fencing during this Parliament". Doing so, they argued, would "demonstrate the government's determination to do what it takes to promote growth and send the strongest possible signal to investors of your commitment to the City and to strengthen the UK's position as a leading international financial centre".
