The chief executive officers of four of Britain’s largest banks have called on the Chancellor of the Exchequer to abolish so-called ring-fencing rules.
HSBC Holdings Plc’s Georges Elhedery and Charlie Nunn of Lloyds Banking Group Plc said in a letter to Rachel Reeves this week that the regulations, which require banking groups to separate their retail banking services from their investment and international banking activities, are a drag on the banks’ ability to support the economy and have become “redundant,” according to people familiar with the matter.
NatWest Group Plc’s CEO Paul Thwaite and Mike Regnier, who runs the UK arm of Banco Santander SA, also signed the letter, said the people, who asked not to be identified disclosing private correspondence.
The rules were a central pillar of the UK government’s response to the global financial crisis in 2008 and are aimed at protecting Britain’s retail banking from shocks emanating from elsewhere. Since then, they have been criticized for being overly rigid and placing unnecessary constraints on banks.
In their letter to the chancellor, which was first reported by Sky News, the bank chiefs said the government should get rid of “unnecessary constraints” on the ability of lenders to support businesses across the UK economy.
“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,” the letter said, according to Sky.
“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. “Lending decisions and pricing are distorted as the considerable liquidity trapped inside the ring-fence can only be used for limited purposes.”
The rules also cause capital inefficiencies and impact negatively on Britain’s standing in the world, the CEOs said.
“There has been a material decline in UK wholesale banking since ring-fencing was introduced, to the detriment of British businesses and the perception of the UK as an internationally orientated economy with a global financial centre,” the CEOs said.
Representatives for HSBC, NatWest and Santander declined to comment, while Lloyds didn’t immediately respond to requests for comments sent on Saturday.
In response to questions about the letter, the Treasury said that banking is “critical” to the government’s top priority of delivering economic growth.
“That’s why the Chancellor has set out a new approach to regulation that supports growth, instead of excessively focusing on risk, and why we are co-designing the first-ever Financial Services Growth and Competitiveness Strategy with industry,” a Treasury spokesperson said.
This article was generated from an automated news agency feed without modifications to text.
Leave a Reply