The largest British banks are urging the supervisory authorities to allow them to use up to GBP 35 billion of their retail deposits to finance their investment banking activities. The aim is to reduce competitive disadvantages compared to US banks such as J.P.Morgan Chase, Goldmann Sachs and Citigroup.

The initiative is being led by HSBC, according to sources cited by the news agency «Bloomberg». The proposal is being presented as a potential compromise in the ongoing dispute over the British ring-fencing system. Since 2013, this has stipulated the separation of the British retail banking business of the country's largest banks from the rest of their business. In addition to HSBC, these are NatWest, Lloyds, Santander UK and Barclays.

The banks in the UK put forward two compelling arguments. One is the competitive advantage of the US banks and the other is that this would release up to 175 billion pounds in funds for the British economy and the five institutions.

Growth Impetus for the Economy

«As a US bank, they can raise up to 35 million pounds from retail deposits in the UK and invest in through their bank, their corporate bank and their investment bank», HSBC UK chief executive Ian Stuart had told a Treasury committee. «We can't do that. Just being able to move liquidity would give more stimulus to the economy and really help businesses in the UK today.»

The UK Treasury has announced its intention to present a strategy for growth and competitiveness in the financial serices sector by the end of the year. The government will «talk to key stakeholders about the case for further ring-fencing reform before we set out our position». The UK regulator has been a vocal supporter of the system in the past. It declined to comment on the talks with the banks, according to the article.

Chancellor Rachel Reeves had signaled that she was open to regulatory reform.

Of the five banks concerned, only Barclays CEO C.S. Venkatakrishnan had pulled out. He had publicly argued that the need to protect customers trumped all ehe agruments of his colleagues in favor of abolishing the regulations.