The UK is set to ease the ring-fencing measures for banks as part of the post-Brexit financial reforms, reported, the Financial Times.
Ring-fencing requires lending groups to separate their retail banking operations from their investment and international operations.
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The measure was introduced by the government in response to the financial crisis to protect customers from losses and reduce risks to the financial system.
Banks with over £25bn in customer deposits are covered by the rule, which was introduced in the UK in 2015 and implemented in 2019.
Speaking at the FT banking summit, City Minister Andrew Griffith said: “We can make the UK a better place to be a bank, to release some of that trapped capital over time around the ringfence.”
As per the report, the regime will stay in place for the top UK investment banks but changes to the rules will allow several UK lenders with limited trading activity to be exempt from the requirements.
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By GlobalDataDespite having limited trading operations, Santander UK, Virgin Money, and TSB Bank are required by the existing ringfencing laws to separate their retail and investment banking divisions.
The changes could allow them to hold less capital against potential losses in both organisations and exempt them from having separate boards for the units.
Due to the scale of their investment banking divisions, the largest institutions in the UK, including Barclays, HSBC, NatWest, and Lloyds, would still have to adhere to ringfencing regulations.
The development follows a report from a review panel led by Keith Skeoch, who served as the chief executive of Standard Life Aberdeen.
The review said that the measure should be retained for now but in the long run “it may lead to the ossification of retail banking as banking services continue to innovate and develop”.
