The chancellor should tread carefully: reforming bank ringfencing carries real risks

Rachel Reeves called it "the biggest set of reforms to financial regulation in a decade", and, in one narrow sense, her "Leeds reforms" would qualify for the description.

- Nils Pratley

Rachel Reeves called it "the biggest set of reforms to financial regulation in a decade", and, in one narrow sense, her "Leeds reforms" would qualify for the description. If the ringfencing regime for banks were to be scrapped, we really would be entering a new era - or going back to an old one, since the separation of banks' retail and investment banking activities was the single biggest regulatory change introduced after the 2008-09 crash to try to prevent another financial blow-up.

Reeves yesterday, however, merely announced a review to look at how reforms to ringfencing could "strike the right balance between growth and stability, including protecting consumer deposits". One hopes that does not mean outright abolition, which the likes of HSBC, Lloyds and NatWest have been urging on the grounds the rules trap capital and impede growth.