The bosses of four of the largest British banks secretly urged the Chancellor to abandon the most important regulatory change imposed after the 2008 financial crisis, which warned its continuous imposition inhibiting the economic growth of the United Kingdom.
Sky News has obtained an explosive letter sent this week by the Directors General of HSBC Holdings, Lloyds Banking Group, Natwest Group and Santander UK in which they claim that bank closure “is not only trail on the capacity of banks to support business and the economy, but is now redundant”.
The CEO’s letter represents an unprecedented intervention of most of the main lenders of the United Kingdom to abolish a reform which cost them billions of pounds to be implemented and which was designed to make the banking system safer by separating retail operations from street groups from their wholesale and investment banking activities.
Their request to Rachel Reeves, the Chancellor, to abandon the hold of the ring 15 years after her conception will be considered a direct challenge for the government to take drastic measures to support the economy during a period when he obliges economic regulators to eliminate administrative formalities.
However, it will trigger the controversy among those who believe that the abandonment of the risk of the most radical post-crisis reform in the United Kingdom exacerbating the consequences of any future collapse of the banking industry.
In their letter to the Chancellor, the quartet of bank chiefs declared to Ms. Reeves: “With the global economic contrary winds, it is crucial that, in support of its industrial strategy, the growth of government financial services and the competitiveness strategy suppresses unnecessary constraints on the capacity of British banks to support companies and send the most clear signal for investors United Kingdom of your commitment to reform.
“Although we have welcomed the recent technical adjustments of the rings closing regime, we think it is now imperative to go further.
“The abolition of the rings closing regime is, in our view, among the most important measures that the government could take to guarantee that the prudential framework maximizes the capacity of the banking sector to support British companies and to promote economic growth.”
The work on the letter would have been led by HSBC, including the new Managing Director, Georges Elhedery, is one of the signatories.
His counterparts in Lloyds, Charlie Nunn; Paul Thwaite de Natwest; And Mike Regnier, who directs Santander UK, also signed it.
Although Mr. Thwaite in particular was public by questioning the continuous need for the ring of the ring, the letter – sent Tuesday – is the first time that such a collective argument has been subjected with force.
The only notable absent from the signatories is CS Venkatakrishnan, the director general of Barclays, although he has publicly declared in the past that the closure is not a major financial head for his bank.
Other industry leaders have expressed skepticism about this position since the origin of illegality was largely considered as an attempted resolution of the enigma posed by the vast barclays investment banking banks.
The introduction of forced lenders to the United Kingdom forced a deposit base of at least 25 billion pounds sterling to separate their weapons into retail and investment banking, which makes them supposed to be easier to manage in the event that part of the company was confronted with insolvency.
Banks have spent billions of pounds by designing and creating their fenced entities, with separate boards of directors appointed to each division.
More recently, the Treasury has decided to increase the deposit threshold by 25 billion pounds Sterling to 35 billion pounds sterling, in the middle of the pressure of a number of faster growth banks.
Sam Woods, the current director general of the main banking regulator, the prudential regulation authority, participated in the formulation of proposals published by the independent commission of Sir John Vickers on the bank in 2011.
The legislation aimed at establishing clandestinity has been adopted in the 2013 law of reform of financial services (bank), and the regime entered into force in 2019.
In addition to the close of the ring, the banks were forced to considerably increase the quantity and quality of the capital they owned as a risk stamp, while they were also invited to create so-called “living will” in the event of financial problems.
The Chancellor has spoke several times about the need to regulate growth rather than the risk – a sentence that the four banks hope to persuade it now to abandon the fence of the ring.
Great Britain is the only great economy to have adopted such an approach to regulate its banking sector-a fact which, according to the four bank leaders, now undermines the competitiveness of the United Kingdom.
“The fence of the rings imposes significant and often neglected costs on companies, including SMEs, by exposing them to banking constraints not experienced by their international competitors, which makes them more difficult for them to set up and compete,” said the letter.
“Loan decisions and prices are distorted, as considerable liquidity trapped inside the ring fence can only be used for limited purposes.
“Companies’ customers whose financial needs become more complex as they increase, more sophisticated or engage in international trade, are assigned negatively since the limits of Californary services can provide.
“The abolition of hiding would eliminate these cliff effects and allow companies to obtain the full suite of single bank products and services, which reduces administrative costs.”
In recent months, doubts have resurfaced on the commitment of the Spanish banking giant Santander in its operations in the United Kingdom in the midst of complaints concerning the costs of regulation and supervision.
The fifth largest lender in the United Kingdom has held provisional conversations on a sale in Barclays or Natwest, although they did not progress towards a formal stage.
HSBC, on the other hand, is particularly agitated as to the impact of the ring fence on its activities, given its sprawling international footprint.
“There has been a significant drop in the British wholesale bank since the introduction of the ring closing, to the detriment of British companies and to the perception of the United Kingdom as an international oriented economy with a global financial center,” said the letter.
“The regime provokes ineffectiveness of capital and imprisoned liquidity, preventing it from being effectively deployed through the group’s entities.”
The four patterns called for Ms. Reeves to use the Dinner of the Maison du Manoir de this summer – the annual city event – to deliver “a clear declaration of intention … to abolish the closure of the rings during this Parliament”.
This, according to them, “would demonstrate the determination of the government to do what it takes to promote growth and send the strongest signal to investors of your commitment to the city and to strengthen the position of the United Kingdom as a leading international financial center”.