By William Schomberg, Tommy Reggiori Wilkes and David Milliken
LONDON (Reuters) -British finance minister Rachel Reeves pledged on Tuesday to ease regulation further and announced measures to boost the finance sector, including reforming requirements for banks to separate retail and investment banking activities and a plan to get more savers investing in stocks.
Under pressure to get lacklustre economic growth going, Reeves doubled down on her message since Labour came to power last year: that post-financial crisis regulation is stifling growth and needs to be pared back.
She promised “meaningful reform” of bank ring-fencing – rules designed to shield depositors from volatile investment banking. She also pledged simpler regulatory approvals for smaller financial companies and confirmed an easing of access to mortgages.
“In too many areas, regulation still acts as a boot on the neck of businesses choking off the enterprise and innovation that is the lifeblood of growth,” she told an audience of financial executives at the City of London’s annual “Mansion House” dinner.
She described her package of reforms as the most wide-ranging in a decade for financial services, and said she wanted to slash red tape much more widely too.
“Regulators in other sectors must take up the call I make this evening not to bend to the temptation of excessive caution,” she said.
Financial executives have welcomed Reeves’ promises – including at her last Mansion House speech – to reduce red tape and encourage risk-taking.
But her pitch to the City comes with the industry worried about a stuttering economy and about rival financial centres stealing market share. While the FTSE 100 index hit a record high on Tuesday, fundraising from companies listing on the London Stock Exchange has sunk to its lowest in decades.
With Reeves and Prime Minister Keir Starmer’s promise to speed up Britain’s economy largely elusive, fears are mounting that taxes will rise further to balance public finances.
The government last month announced a 10-year industrial strategy that included the financial services sector.
On Tuesday, Reeves backed changes announced by the Bank of England to help banks free up capital, including a delay to the implementation of part of the Basel banking reforms, and an easing in capital requirements for mid-sized lenders.
Barclays CEO, C.S. Venkatakrishnan, who was at the Mansion House dinner with Reeves, said the regulatory changes would support UK financial sector competitiveness.
“We applaud the underlying ambition and initiative, even as we wish greater change in some areas, like bank capitalisation, in order to boost support for the real economy, and much less in others, like UK ring-fencing, which is a core of depositor protection,” he said in an emailed statement.
Karim Haji, KPMG’s global and UK head of financial services, said the critical test for reforms “will be in their execution and how quickly these proposals can translate into real, measurable benefits for firms, investors, and consumers.”
ALERTING CUSTOMERS
Britain has the lowest level of retail investment among the Group of Seven rich countries, the finance ministry said, and the government has been looking for levers to get more money into stocks.
From April 2026, the Financial Conduct Authority – a regulator – will allow banks to alert customers about specific investment opportunities so they can consider shifting money from low-return current accounts.
Before then, banks will run an advertising campaign to promote share investments.
Regulators will review the risk warnings given for different financial investments.
The government stopped short of reducing tax incentives for savers using cash-only Individual Savings Accounts to aid investment in shares, but Reeves said she would consider further changes.
As well as consumers, the finance minister has targeted British pension funds.
Reeves said she was “confident” she would not need to use new powers to force funds to invest in a wider range of assets, although the new pension bill reserves that right.
As well as long-term reform, greater “near-term incentives” were needed to unlock more pension fund money, Anne Glover, CEO of venture capital investor Amadeus Capital Partners, said following Reeves’ speech.
Other changes announced on Tuesday included reforming how the Financial Ombudsman Service resolves consumer complaints and for the FCA to review the impact of its consumer duty policy.
The Senior Managers and Certification Regime – set up after the 2008 financial crisis – will be streamlined, Reeves said.
Prospectus requirements for listing companies issuing new shares will be scrapped.
New rules to support a more competitive captive insurance sector were proposed while the FCA said it would accelerate the process for authorising new companies.
(Additional reporting by Sachin Ravikumar and Lawrence White; Writing by David Milliken and William Schomberg; Editing by Susan Fenton and David Gregorio)
