London Daily

Focus on the big picture.
Thursday, Mar 19, 2026

UK banking rules face biggest shake-up in more than 30 years

UK banking rules face biggest shake-up in more than 30 years

The government is set to announce what it describes as one of the biggest overhauls of financial regulation for more than three decades.

It is expected to loosen rules on banks introduced after the financial crisis in 2008 when some banks faced collapse.

The changes will be presented as an example of post-Brexit freedom to tailor regulation specifically to the needs and strengths of the UK economy.

Critics will say it risks forgetting the lessons of the financial crisis.

The plans to ease regulations on financial services are being described as a second "Big Bang" - a reference to the deregulation of financial services by Margaret Thatcher's government in 1986.

Rules that forced banks to legally separate their retail lending arms from their riskier investment operations will be reviewed, as will rules governing the hiring, monitoring and sanctioning of senior finance executives.

The government has already announced it will scrap a cap on bankers' bonuses and allow insurance companies to invest in long-term assets like housing and windfarms to boost investment and help its levelling up agenda.

Chancellor Jeremy Hunt, who will announce a package of more than 30 regulatory reforms, said the changes would "unlock investment across our economy to deliver jobs and opportunity for the British people".

"Leaving the EU gives us a golden opportunity to reshape our regulatory regime and unleash the full potential of our formidable financial services sector," he added.

Mr Hunt is set to meet with bosses of the UK's largest financial services in Edinburgh on Friday to discuss the reforms.


Rules review


After the financial crisis of 2008, when the government had to spend billions supporting the UK banking system, a new regime was brought in to increase the personal accountability of senior risk-taking staff.

It allows for fines, bans and even custodial sentences, although there have been very few examples of enforcement.

But City insiders say a major disadvantage it imposes is the lengthy process of getting the movement of senior staff to the UK approved by the regulator - making London less attractive to foreign firms.

Complex rules on how commissions and services, such as research, are paid for will also be reviewed.

After the financial crisis, large banks were forced to separate or "ring fence" their domestic banking operations (mortgages, loans etc) from their investment banking operations (exposing their own cash to market volatility), that were deemed riskier.

The cost of having two separate shock-absorbing cushions of spare money (capital) was deemed by some as placing extra costs on the sector. This may be mentioned in the overhaul, but most of the big banks have spent billions on this ring fencing and are not calling for its reversal.

Reforms of ring fencing are aimed at mid-size banks such as Virgin Money and TSB.

There may also be new rules around bundling investments together into tradeable units - a process called securitisation. This process was instrumental in exacerbating the 2008 financial crisis as no one really knew where the bad debts were located so everyone stopped lending to everyone.

The government will also re-announce more freedom for the pensions and insurance industry to invest in longer term, illiquid (hard to sell quickly) assets - e.g. social housing, windfarms, nuclear - which the government will say helps their levelling up ambitions.

It is worth noting that although this will be billed as a Brexit freedom, the EU is undertaking similar reforms.

There will be some nod to developing the UK as a centre for crypto assets, but with some caveats given the recent bloodbath after the demise of the cryptocurrency exchange FTX. Most financial industry leaders say they are crypto curious but don't feel the need to be first on this. "Let the shipwrecks of others be your seamarks," said one.


'Jurassic Park of companies'


London's position as the pre-eminent European financial centre has been dented in recent years. London briefly lost its long-time crown of most valuable European stock market to Paris before gains in the pound pushed it narrowly back ahead, while Amsterdam took the title of busiest European share dealing centre.

Leading hedge fund manager Sir Paul Marshall of Marshall Wace recently described the London financial markets as a "Jurassic Park" of old-fashioned companies and investors, and it has struggled to attract the world's fastest growing companies to list on UK exchanges, often losing out to New York, Shanghai or even Amsterdam.

Labour politicians have criticised the scrapping of the bonus cap and said the UK should not engage in a regulatory race to the bottom, but the government will insist the reforms strike the right balance between stability and innovation.

Others will say that in loosening regulation we risk forgetting the lessons of the financial crisis when excessive risk taking ended in billions in bailouts and a decade of stagnating productivity.

Newsletter

Related Articles

0:00
0:00
Close
GB News Faces Regulatory Complaints Over On-Air Remarks on ‘Genocide’ Claims
UK Signals Expanded Support for Gulf Allies as Iranian Attacks Intensify Regional Threats
UK VAT Decision Opens Path for Potential Refunds to U.S. Biopharma Firms
UK and Canada Advance ‘Middle Power’ Strategy to Shape Global Influence Beyond Superpowers
Google Explores AI Opt-Out Features in Search to Address UK Regulatory Concerns
Google Explores AI Opt-Out Features in Search to Address UK Regulatory Concerns
UK Fuel Prices Poised to Surge as Global Tensions Drive Oil Market Volatility
UK Fuel Prices Poised to Surge as Global Tensions Drive Oil Market Volatility
UK Holds Back on Hormuz Escort Mission While Continuing Talks with Allies
TrumpRx Pricing Platform Faces Scrutiny as Some Medicines Remain Costlier Than in the UK
UK, Netherlands and Finland Explore Joint Defence Investment Bank to Boost Military Capability
Deadly Meningitis Outbreak in Kent Raises Alarm as Cases Surge and Emergency Response Expands
UK Security Adviser Viewed US-Iran Nuclear Deal as Within Reach Before Sudden Escalation
UK Prime Minister Urges Continued Focus on Ukraine Amid Escalating Iran Conflict
UK Introduces New Safeguards to Shield Lenders from Bank Run Risks
UK Promotional Products Market Surpasses £1.3 Billion as Demand Strengthens in 2025
Reeves Pushes for Deeper UK-EU Economic Ties to Revive Growth
UK Security Adviser Saw No Imminent Iranian Nuclear Threat Days Before War Erupted
France Signals Warm Welcome for UK Return to EU Single Market Amid Renewed Cooperation Talks
UK Defence Official Criticises Boeing Over Delays to E-7 Wedgetail Programme
UK Urged to Secure Quantum Talent as Minister Warns Against Repeating AI Setbacks
UK Mayors Set to Gain New Spending Powers Under Reeves’ Fiscal Devolution Plan
Western Allies Urge Restraint as Israel Weighs Expanded Ground Operation in Lebanon
Trump Warns NATO Faces ‘Very Bad’ Future Without Stronger Allied Support in Iran Conflict
UK Minister Says Britain Not Bound to Support Every Demand From U.S. President
Starmer Tells Trump Britain Will Not Be Drawn Into Wider Iran War
Starmer Tells Trump Britain Will Not Be Drawn Into Wider Iran War
UK Set to Introduce Steel Tariffs of Up to 50 Percent in New Industrial Strategy
European Governments Decline Trump’s Call to Send Warships to Reopen Strait of Hormuz
Fears Over Iran Conflict Weigh on UK Consumer Confidence
Starmer Says UK Working With Allies on Hormuz Shipping Plan After Trump Raises Pressure
Iran War and Energy Shock Shake Britain’s Economy and Political Debate
Deadly Meningitis Outbreak at UK University Leaves Two Dead and Several Seriously Ill
Deadly Meningitis Outbreak at UK University Leaves Two Dead and Several Seriously Ill
King Charles and Queen Camilla Share Personal Tributes to Their Mothers on UK Mother’s Day
Prince William Honors Princess Diana with Mother’s Day Tribute
UK Economy Stalls in January as Households Cut Back on Eating Out
AI-Generated Singer Becomes Viral Voice for Iranians With New Anthem
London Private Club Founder Plans Exclusive Palm Beach Venue Near Trump’s Mar-a-Lago
Ed Davey Urges Britain to Build Fully Independent Nuclear Missile Capability
What the UK Covid Inquiry Is and How It Investigates Britain’s Pandemic Response
What the UK Covid Inquiry Is and How It Investigates Britain’s Pandemic Response
US Treasury Links British Polo Patrons to Alleged Venezuelan Oil Proceeds Laundering Scheme
Hundreds Gather in London Despite Ban on Annual Pro-Palestinian March
Two Dead and Multiple Students Seriously Ill After Invasive Meningitis Outbreak at UK University
UK Considers Deploying Ships and Mine-Hunting Drones to Reopen Strait of Hormuz
Starmer and Trump Discuss Urgent Need to Reopen Strait of Hormuz Amid Escalating Iran Conflict
Prince Harry and Meghan Markle’s Planned Australia Visit Draws Mixed Reaction From Local Communities
Trump Calls on France and UK to Help Safeguard Strait of Hormuz Shipping Route
Boris Johnson Labels Bitcoin a ‘Ponzi Scheme’, Sparking Debate in Crypto World
×