LONDON, May 18 (Xinhua) -- The British government on Monday announced reforms to its bank ring-fencing regime, saying the changes could unlock up to 80 billion pounds (107 billion U.S. dollars) in additional support for businesses while keeping key financial safeguards in place.
The Treasury said the package is designed to make the regime more agile and proportionate, allowing major banks to support business lending and investment more effectively without weakening protections for depositors or financial stability.
Introduced after the 2008 global financial crisis, the ring-fencing regime requires Britain's largest banks to separate core retail banking services, including household deposits and small business lending, from riskier investment banking and trading activities. The system was designed to protect ordinary depositors and ensure access to essential banking services during periods of financial stress.
At the center of the reforms is a proposed new Growth Allowance, which would give major banks limited flexibility to use part of their ring-fenced balance sheets for activities that support the real economy.
The Treasury said the allowance, together with a broader range of permitted products and services, could help channel more financing into British businesses, jobs and wider economic growth.
Under the proposals, ring-fenced banks would be able to offer more services to growing firms, including improved hedging tools to help businesses manage risks such as interest rate and exchange rate changes. They would also have greater scope to work with programs delivered through public financial institutions, including the British Business Bank and the National Wealth Fund.
The reform package would also give the Prudential Regulation Authority more flexibility to update and tailor detailed rules over time. The government said more technical requirements would be placed in regulatory rules rather than fixed in legislation, enabling the regulator to remove outdated requirements and adapt the regime as the financial system evolves.
The Treasury stressed that the core purpose of ring-fencing would remain unchanged. Ring-fenced banks would continue to operate independently from investment banking activities, helping protect retail deposits from volatility in global financial markets.
Alex Depledge, entrepreneurship advisor to the Chancellor, said the reforms would help fast-growing firms access capital as they scale up.
"Too often, our fastest-growing firms hit a wall of unnecessary friction just as they start to scale,"she said. "This is about backing ambition, cutting friction, and ensuring our banks can power the next generation of great British businesses to start, scale and stay here." ■