Bank of England governor defends UK ringfencing rules for lenders

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Andrew Billy, the governor of the Bank of England, defended the rules of Ringfense that force the UK lenders to separate retail operations from other activities, warning that the disposal process would make real estate loans and other loans more expensive.

Billy told the Ministry of the House of Commons of the House of Commons in a speech that the bank heads were wrong to say that Ringfense hindered their ability to lend to British families and smaller companies.

He said in the letter published on Tuesday and sent last week: “It is likely that the removal of Ringfense is likely to have a negative impact on lending in the United Kingdom, both in terms of cost and quantities, as banks direct funding from retail deposits away from families in the United Kingdom and small and medium -sized institutions or towards investment banking activities outside the United Kingdom.”

The regulations entered into force in 2019 and were presented to avoid the recurrence of taxpayers rescue for failed lenders who followed the financial crisis 2008-2009. The bank’s executive managers rose to the government to return the most famous parts of the plan.

Billy refused criticism by the industry, saying that the rules reduced the cost of capital for banks in the United Kingdom by making it seem safer for investors. He added that this, in turn, allowed lenders to provide mortgages and other loans at lower rates than they had otherwise.

The Governor of Bank of England referred to the previous research conducted by the Central Bank Finance Committee, which estimates that the rules have reduced the “optimal capital levels” of banks in the United Kingdom by 5 percentage points in terms of that.

UK banks have a capital of 15.9 percent of their modified assets for risk at the end of December.

“Without any separation between retail sediments of living families and small and medium enterprises of small and medium -sized companies and global commercial activity hosted in the United Kingdom, we will need to adopt a more restricted approach to overseeing international companies that constitute a large part of the United Kingdom’s financial position in order to protect local lending from global risks.”

The Financial Times recently reported that the Exclusive Organization of the Bank of England, which supervises banks in the United Kingdom, is studying ways to alleviate the promotion rules without removing the basic protection provided by retail deposits.

One of the options is to consider allowing the bank to rely on the rest of the group for more rear office services.

The discussion about Ringfation is increasing in intensification before the speech of the Palace Dar Richel Reevis in July, when it plans to present a new strategy for a new strategy to enhance growth and competitiveness in British financial services.

The heads of four of the largest banks in Britain – HSBC, LLOYDS Banking Group, and NatWest and Santander UK – last month Reeves to cancel Ringfense as part of new plans.

Their letter said: “The removal of the Ringfense system is, we believe that among the most important steps that the government can take to ensure that the cautious framework increases the ability of the banking sector to support the UK business and enhance economic growth.”

The batch is not supported to remove Ringfense globally. The CEO of Barclays Cs Venkatakrishnan refused to sign the message and said last month: “Ringfense helps protect depositors by separating the obligations and assets and making it easy to make depositors completely. Go alongside the depositor.”

The Ringfense system aims to protect structural deposits from retail consumers and small companies by claiming major British banks to separate them into legal entities with higher levels of capital and restricted activities.

The rules prevent banks that use funds from British retailers to finance complex and risky activities, such as financing hedge funds, trading in complex derivatives or corporate lending in countries like China.