'Very bad idea' to end ringfencing for banks, say City grandees

Rachel Reeves has been warned by City grandees that her plan to slash financial red tape could have little benefit for households while dialing up risk in the banking industry.

- Richard Partington Phillip Inman

The chancellor used a speech to City bosses at the annual Mansion House dinner on Tuesday to argue that regulation was acting as a "boot on the neck of business" as she promised sweeping changes aimed at reviving the economy.

However, leading figures in the drive to prevent a repeat of the 2008 financial crisis warned Labour against unpicking a key measure introduced to protect households and businesses from a future catastrophic collapse: bank ringfencing.

John Vickers, the architect of the UK's ringfencing rules, deployed after the financial crisis to separate high-street banking from riskier investment banking, said a wholesale retreat would be a "very bad idea".

Adair Turner, who took over as chair of the Financial Services Authority during the 2008 crash and played a leading role in the redesign of the banking system, also warned the chancellor to proceed with caution.

The advertising agency WPP has been asked to work up potential ideas for a government-backed publicity blitz that will urge more people to invest in shares.