(Reuters) -The chief executives of UK banks HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK have written to finance minister Rachel Reeves asking her to abolish bank ring-fencing, Sky News reported on Saturday.
In a letter sent to Reeves this week, the chief executives said bank ring-fencing – which separates consumer lending operations from more volatile investment banking – “is not only a drag on banks’ ability to support business and the economy, but is now redundant”, the report said.
A spokesman for HSBC confirmed the letter existed as reported and that the bank was a signatory. NatWest and Santander UK declined further comment on the letter and Lloyds did not immediately respond to a request for comment outside of regular business hours.
The ring-fencing rules were introduced after British taxpayers had to bail out several failing lenders during the financial crisis.
In their letter to Reeves, the bank chiefs said that given global economic challenges, it was crucial that the government “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.”
“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.
Banks have long argued that the rules are too onerous and hamper Britain’s competitiveness versus other global financial centres.
Reeves has said that moves to eliminate risk after the financial crisis in 2008 have gone too far, and has stepped up pressure on regulators and other public bodies to remove barriers that might be hindering economic growth.
But Bank of England governor Andrew Bailey in February warned that the costs of that global financial crisis should not be forgotten in the backlash against the burden of financial regulation, saying there is no trade off between economic growth and financial stability.
Britain’s finance ministry had no immediate comment on the report while the Bank of England declined to comment.
(Reporting by Disha Mishra and Rhea Rose Abraham in Bengaluru and Alistair Smout in London; Editing by Alexandra Hudson and Susan Fenton)
