UK banks face a potential relaxation of 'ring-fencing' rules that keep their retail banking business separate from the rest of their business, according to a report.
The government is mulling potential changes to these banking sector rules, which currently apply to lenders with at least £25bn of deposits.
It is to help boost the economy and because UK banks are seen as being at a disadvantage to US and EU lenders, where rules are seen as less tight, according to a report on the Politico website.
The ring-fencing rules were constructed in the wake of the 2008 credit crunch to protect customers' money in the event of bank fails, but were not completed and fully enforced until 2019 when £1.2 trillion of core deposits was secured in ring-fenced banks.
At issue are "ring-fencing" regulations, which keep retail and investment banking separate to protect basic consumer services from suffering big losses if another part of the bank fails. One of the UK's boldest post-crisis reforms, it took from 2013 to 2019 to complete.
With banks becoming strongly capitalised in recent years, those advocating for a watering down of the rules see it as a potential boost for the sector and hence the economy as it would give the banks more leeway to operate in capital markets, the report said.
However, as the Bank of England says, ring-fencing is designed to increase the stability of the UK financial system and prevent the costs of failing banks falling on taxpayers.
The BoE's latest list of ring-fenced lenders as at 20 May 2021 is: Barclays PLC (LSE:BARC), HSBC PLC (LSE:HSBA), Lloyds Banking Group PLC (LSE:LLOY), NatWest Group PLC (LSE:NWG), Santander UK TSB Bank PLC and Virgin Money UK PLC.