Banking Reforms to Boost Investment by Billions for British Businesses

British businesses stand to benefit from billions in fresh financing being unlocked through reforms to the bank ring-fencing regime

The reforms will create a more agile and proportionate framework for ring‑fencing that makes it easier for banks to operate efficiently without weakening protections for customers.

At the heart of the changes is a new Growth Allowance, which 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 - helping firms invest, expand and create jobs across the country.

The reforms will also give the Prudential Regulation Authority (PRA) more flexibility to update and tailor the rules over time. Instead of relying on rigid legislation, more of the detail will sit in regulatory rules, allowing the PRA to adjust them more quickly as the financial system evolves. This will mean the PRA will be able to remove outdated requirements or adapt rules to reflect wider banking reforms.

Boosting growth across the economy is a top priority of the reforms, with the Treasury seeking to modernise and streamline the regime while removing unnecessary barriers to lending and investment in the UK.

The package, designed in close collaboration with the Bank of England, will continue to provide strong protections for depositors and ensure stability of the UK’s banking system.

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.

At the heart of the changes is a clear objective for government: to ensure more financing can flow into UK businesses more easily and do so more easily: all while supporting innovation, expansion and higher living standards.

Economic Secretary to the Treasury and City Minister, Rachel Blake said:

Alex Depledge, Entrepreneurship Advisor to the Chancellor, said:

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.

Maintaining protections and stability for consumers is essential to the reforms - ring‑fenced banks will continue to operate independently from investment banking activities, protecting retail deposits from volatility in global financial markets. The government will consult on the detail of the reforms to ensure protections are maintained while maximising the benefits for growth.

The government will also ensure the regime remains proportionate over time, including regular reviews of key thresholds and reporting requirements.