Rachel Reeves will outline the next steps of her ring-fencing reforms at Mansion House on Tuesday, City AM can reveal, in what is expected to be one of her last acts in the Treasury. The Chancellor will launch a consultation to seek industry input on the implementation of a package of
Samuel Norman
Monday 13 July 2026 12:10 pm
Rachel Reeves will outline the next steps of her ring-fencing reforms at Mansion House on Tuesday, City AM can reveal, in what is expected to be one of her last acts in the Treasury.
The Chancellor will launch a consultation to seek industry input on the implementation of a package of reforms announced in May, including the introduction of a new “growth allowance”.
Reeves said earlier this year that the introduction of a growth allowance would open new avenues for lenders, allowing retail banks previously fenced in from participating in certain types of flexible, higher-risk lending or offering complex corporate finance products.
Ring-fencing was a part of a raft of post-financial crisis measures and came into force in January 2019, requiring major banks to separate their retail and investment banking activities.
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. The £35bn deposit ceiling, which banks have to ringfence their retail operations, will also be up for review every three years.
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The Treasury claimed the reforms would help unlock up to £80bn of additional financing for UK businesses.
Banks, however, have been left holding their breath for immediate change, with the Treasury previously stating the reforms will be delivered “as soon as Parliamentary time allows”.
Legislation on the cards, but for the new Chancellor
Secondary legislation is expected to be on the agenda following enactment of the Financial Services Bill, which is currently making its way through the House of Lords before heading to the House of Commons.
The consultation will seek detailed feedback on the implementation of the reforms and on the technical details of the legislative changes. But a new Chancellor is likely to respond to its results, with Rachel Reeves tipped to be demoted once Andy Burnham takes office later this month.
Read more Badenoch sets sights on battle with the Bank
Energy secretary Ed Miliband is the frontrunner to replace Reeves, with former health secretary Wes Streeting also reported to be in the running along with home secretary Shabana Mahmood.
The completion of the reforms will mark a modest win for the UK’s more domestically focused lenders, such as Natwest, Lloyds and Santander, who have lobbied for the total abolition of the rules.
The trio, along with HSBC, wrote to Reeves last year calling for the “redundant” regime to be scrapped, adding it was a “drag on banks’ ability to support business and the economy”.
CS Venkatakrishna, Barclays’ chief executive, was the only banking boss to launch a defence of the system, arguing “we have spent the money on the set-up and we make it work”. Barclays’ retail operations benefit from being shielded from its mammoth investment bank, which generated roughly 45 per cent of group revenue last year.
The Conservative Party has proposed going further with reforms in its bid to woo the City.
Shadow Chancellor Mel Stride told City AM: “Don’t just try and open up a chink in [ring-fencing]” as he outlined his party’s plans to tear up the regime.
The Tories estimate some £1.5bn in capital will be freed up by ripping up the system.
Bank of England governor Andrew Bailey has pushed back against public calls to ditch the rules, warning that doing so would have a “negative effect on UK lending,” with funds directed away from retail lending to investment outside the UK.
Read more Rachel Reeves’ legacy of tinkering with the City is not enough, says Mel Stride
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