Lloyds, Natwest and Barclays all made gains Monday on reports that the government has decided not to implement a windfall tax on their profits.
The Sunday Times reported that a windfall tax on the banking sector to plug a big hole in the government finances was unlikely.
"The government last night quashed suggestions that it is considering a windfall tax on banks as one of the measures to plug a hole in its finances at next month’s budget," said the report.
"Two senior sources close to prime minister Rishi Sunak and chancellor Jeremy Hunt played down the idea that they were looking at ways to impose additional taxes on banks."
Speculation prior to the weekend had been that the new chancellor was keen to tax the bumper profits derived by UK banks from rises in interest rates.
Lloyds added 2% to 42.1p, Natwest rose 4.7% to 235.4p, and Barclays took on 1.2% to 148.2p.