The government will increase the threshold for bank foreclosures to £35 billion in a boon for Chase and Marcus
- The bank ring-fencing limit will rise from £25 billion to £35 billion
The government is about to give the green light to a measure to increase the threshold for bank ringfencing from £10 billion to £35 billion.
In a written ministerial statement, City Minister Tulip Siddiq announced a package of reforms to improve “competition and competitiveness” in the UK banking sector.
The move will allow banks to amass £35 billion in customer deposits before they have to ring-fence retail banking operations from riskier investment banking activities.
US investment banking giants JP Morgan and Goldman Sachs, which own Britain’s popular Chase and Marcus deposit accounts, will benefit from the change – and it could lead to them offering higher savings rates.
Minister Tulip Siddiq has announced plans to revise bank foreclosure rules. American Chase and Marcus will benefit from the change
Chase and Marcus are not ring-fenced from the broader business of the investment banks, so the £25bn cap was a barrier to their deposit growth.
In 2020, This is Money revealed that Goldman Sachs-owned Marcus had to close its market-leading easy-access account to new customers as it was close to exceeding its £25 billion limit.
At the time, Marcus had raised around £21 billion from more than half a million UK savers since its launch in 2018, at a pace of £1 billion per month.
Ring-fencing requirements were introduced to protect customer deposits after the government bailed out failing banks during the 2008 financial crisis.
Under current rules, core banking services, such as taking deposits, making cash withdrawals and lending to UK retail customers, must be separated from investment banking and international banking activities.
“The reforms will improve competition and competitiveness in the UK banking sector and improve economic growth, while maintaining financial stability,” Siddiq said.
The package of reforms also aims to introduce a new ‘secondary’ threshold that will exempt retail-focused banking groups from ring-fencing rules, provided that investment banking activities make up less than 10 percent of their Tier 1 capital.
Under the plans, new flexibilities will also be introduced to enable ring-fenced banks to operate globally, subject to Prudential Regulation Authority rules.
The changes follow an independent review of the ringfencing policy led by Sir Keith Skeoch in March 2022, which made recommendations to improve the operation of the ringfencing regime. It is believed that the rise was close to happening under the previous government.
The government said it would implement the reforms “as soon as parliamentary time permits.”
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