Reforms to the bank ring-fencing regime will make it easier for banks to operate efficiently without weakening protections for customers, the UK Government says.
A new Growth Allowance will let major banks use a limited portion of their balance sheets more flexibly, potentially unlocking up to £80 billion of additional financing for UK businesses, it added.
The reforms will also give the Prudential Regulation Authority (PRA) more flexibility to update and tailor the rules over time.
Set out in a new report – Safeguarding Stability, Enabling Growth – the reforms will be delivered through the forthcoming Enhancing Financial Services Bill and subsequent legislation and form a central plank of the Financial Services Growth and Competitiveness Strategy.
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.”
Alex Depledge, Entrepreneurship Advisor to the Chancellor, said:
“This is exactly the kind of pro‑growth reform the UK needs. Too often, our fastest‑growing firms hit a wall of unnecessary friction just as they start to scale. These changes will unlock more of the capital founders need to keep building in the UK, while maintaining the financial stability that underpins investor confidence.
“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.”
Ring‑fencing is a key part of the UK's post‑financial crisis banking reforms, requiring the largest UK banks to separate their core retail services – such as retail and SME deposits and lending – from riskier investment and trading activities. This helps to protect depositors, maintain access to banking services, and support financial stability if shocks occur.
Through the reforms banks will also be able to offer a broader range of products and services to support firms as they grow, including better hedging tools and greater access to programmes delivered through public financial institutions such as the British Business Bank and National Wealth Fund.
Ring‑fenced banks will continue to operate independently from investment banking activities, protecting retail deposits from volatility in global financial markets. The UK Government said it would consult on the detail of the reforms to ensure protections are maintained while maximising the benefits for growth.
