<div id="readability-page-1">  <p><time datetime="2026-05-18T12:26:34+01:00">    Monday 18 May 2026 12:26 pm  </time></p>         <div>                                                                                                                 Add as a preferred        source on Google                        </div>    <figure>    <div>       </div> <img width="742" height="495" src="https://imageproxy.pbkrs.com/https://www.cityam.com/wp-content/uploads/2026/04/natwestbranches.jpeg/query-dz03NDI?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://www.cityam.com/wp-content/uploads/2026/04/natwestbranches.jpeg/query-dz03NDI"/>  <figcaption>Natwest is primed to benefit from a ring-fencing shakeup.</figcaption> </figure> <p>Rachel Reeves has handed a major boost to the likes of Natwest and Lloyds with an overhaul of the ring-fencing regime in hopes to free up capital to be invested into the UK.</p><p>The Treasury has unveiled a shakeup of the 15-year-old legislation, which requires major banks to separate their retail banking operations from their investment banking activities, after lobbying from banking chiefs branding the structure “redundant”.</p><p>A “growth allowance” introduces a new door for retail banks previously fenced in from participating in certain types of flexible, higher-risk lending or offering complex corporate finance products.</p><p>The Treasury said this permit would pump up to £80bn into high-growth British businesses through letting major retail banks deploy a limited portion of their balance sheets with far greater flexibility. </p><p>Under the new rules, institutions will also be able to share back-office functions – such as IT infrastructure, data processing, and compliance teams – across the fence, allowing them to slash administrative costs.</p><h2 id="h-natwest-and-lloyds-tipped-as-top-beneficiaries">Natwest and Lloyds tipped as top beneficiaries </h2><p>Analysts expect changes to the regime – which was mandated in the Financial Services Act 2013 – would benefit Natwest and Lloyds the most.</p><p>A “blue sky” scenario from RBC estimated a sector benefit of around £2.5bn if ring-fencing were to be ripped up. In a base case, savings top £1.5bn, with Natwest leading the pack as the top beneficiary. </p><p>The FTSE 100 giant was framed as the biggest winner “due to the larger funding cost gap between the ring-fenced back and non-ring-fenced back,” analysts Benjamin Toms, Anke Reingen and Pablo de la Torre Cuevas said.</p><p>The bosses of HSBC, Lloyds, Natwest and Santander slammed the ring-fencing in a letter to Reeves in last April, arguing it was obstructing the firms’ “ability to support business and the economy”.</p><p>CS Venkatakrishnan, Barclays’ chief executive, was the only FTSE 100 banking chief to launch a staunch defence of the system. He argued the “immense amount of depositor protection that the ring-fencing regime gives the country” made it worth while.</p><h2 id="h-banking-watchdog-s-powers-beefed-up">Banking watchdog’s powers beefed up</h2><p>In the Treasury’s new package, ring-fenced banks will be allowed to offer a wider array of products to growing firms, including better hedging tools and increased access to programmes delivered via public financial institutions, such as the British Business Bank and the National Wealth Fund.</p><p>The government is also shifting its rulebook’s fine print into the hands of the Prudential Regulation Authority (PRA), giving regulators the power to adapt or sunset specific rules as the economy evolves, rather than waiting for an Act of Parliament.</p><p>Paul Thwaite, chief executive of Natwest, said:  “These changes have the potential to increase lending and investment, in line with the government’s wider ambitions of helping to unlock growth for households and businesses in every region and nation of the UK.  ”</p><p>City minster Rachel Blake said: “These reforms will ensure more financing flows into UK businesses, and we can support growth and create jobs across the country.</p><p>“This will unlock finance for growth while keeping the UK banking system resilient, competitive and fit for the future.”</p> </div>

LLOY

<p>Rachel Reeves has announced significant reforms to the ring-fencing regime, aimed at boosting capital investment in the UK. The changes will allow major banks like Natwest and Lloyds to engage in higher-risk lending and share back-office functions, potentially injecting up to £80bn into high-growth businesses. Analysts predict Natwest will be the biggest beneficiary, with estimated savings of £1.5bn to £2.5bn. The reforms are designed to enhance lending capabilities while maintaining the resilience of the UK banking system.</p>

Rachel Reeves reforms ring-fencing in boost to Natwest and Lloyds