The Treasury has set out plans to relax financial crisis-era ring-fencing rules on banks in a bid to help increase lending and investment.
The reforms are designed to create a “more agile and proportionate” regime for retail banks and would enable £80 billion in additional lending to businesses, the Treasury said.
It said that the changes would leave key protections unchanged.
The move was warmly received by a raft of banks including NatWest and Santander on Monday.
It is the latest policy change from the Chancellor aimed at easing red tape in a bid to increase investment to help drive further growth, despite concerns that this could lead to higher risk.
Ring-fencing rules were strengthened after the 2008 financial crisis to ensure that problems in investment banking divisions did not spill into their high-street banking operations, in order to protect consumers.
Economic secretary to the Treasury and city minister Rachel Blake said: “Where financial systems are inefficient, we will change them.
“These reforms will ensure more financing flows into UK businesses, and we can support growth and create jobs across the country.
“This will unlock finance for growth while keeping the UK banking system resilient, competitive and fit for the future.”
The Bank of England’s Prudential Regulation Authority (PRA) said it will consult on proposed reforms and publish its results this summer.
The reforms will give the PRA more flexibility to update and tailor ring-fencing rules over time, instead of “relying on rigid legislation”.
David Bailey, executive director for prudential regulation at the PRA, said: “The PRA’s forthcoming consultation on shared services is designed to make the ring-fencing rules more proportionate, reducing the compliance costs for Britain’s biggest banks.
“It will allow banks more flexibility in the way they support their customers whilst retaining important protections for consumers’ deposits.”
Mahesh Aditya, chief executive of Santander UK, said: “The proposed changes are a positive step in the right direction in helping strike the right balance between maintaining the strength and resilience of the UK financial system while also enabling banks to do even more to support growth, investment and jobs across the country.”
Paul Thwaite, chief executive of NatWest Group, said: “These changes have the potential to increase lending and investment, in line with the Government’s wider ambitions of helping to unlock growth for households and businesses in every region and nation of the UK.”
