Goldman, JPMorgan Fringe Talks Stoke Fears of Weakening Rules

Goldman Sachs and JPMorgan have scheduled meetings with a high-profile panel looking at the future of ring-fencing reforms, raising concerns about the role of big banks in crafting financial barriers.

The meetings came as Treasury set up a task force to review the future of bank ringfences, according to people familiar with the matter.

Records obtained by financial news show how influential groups in the City, including Wall Street banks, had the attention of a panel that reviewed the rules much more frequently than groups representing consumers.

While the panel recommended that the government keep the core of the ring-fencing regime, which attempts to safeguard consumer deposits by separating them from investment banking, it suggested a number of adjustments.

“With banks writing their own rules, it’s no wonder the public is losing faith in the government’s ability to listen and meet their needs,” said David Barmes, senior economist at Positive Money.

A Freedom of Information Act request from FN shows that Goldman Sachs held two meetings with the panel in the run up to its report. The bank had previously questioned the ring-fenced threshold, citing it as a barrier to growth for its Marcus digital bank, which launched in the UK in 2018. Goldman declined to comment on its commitment to the review.

Other banks that had meetings included JPMorgan, which continues to build its nascent Chase savings brand in the UK, HSBC, Barclays and NatWest.

Banking and corporate lobbyists such as the Confederation of British Industry, TheCityUK and UK Finance are also featured, prompting questions from some campaigners about the level of influence financial services companies might have had on the results compared to interest groups. consumers.

JPMorgan and HSBC declined to comment. Barclays and NatWest have been contacted for comment.

Ringing rules were put in place in the wake of the financial crisis, separating consumer deposits from riskier investment banking activities in a bid to protect retail operations in the event of another crash.

Former Standard Life Aberdeen boss Keith Skeoch was asked to chair an independent panel on whether the rules were still up to scratch. His report, published in March, backed keeping the 25bn pound deposit threshold at which banks must separate their operations, but argued that when banks were deemed “settled” under a separate bankruptcy regime, they should be removed. of the protection network. along with other adjustments amounting to a slight relaxation of the regime.

The government has remained silent on the recommendations ever since. The new task force is made up of senior officials from the Bank of England and the Treasury, which will help inform the government’s next steps and potentially end the state of limbo, people familiar with the matter said. FN.

A source close to the review said a number of staff supported the panel through a secretariat, and some of these staff members have now been assigned to the task force.

READ Ringing review leaves UK banks with an uncertain future

According to research and campaign group Positive Money, close to a third of treasury ministers’ meetings in 2020 and 2021 were with the financial sector and its lobbyists, far more than any other sector, and nearly three-quarters of all past and present meetings of the Bank of England. decision makers have held roles in private finance.

Marloes Nicholls, head of policy and advocacy at The Finance Innovation Lab, said FN: “The Skeoch Review’s biggest takeaway is that the ring-fencing is doing its job: protecting people’s money and taxes from the costs of reckless casino banking. Given that the report endorses the security fence, it is puzzling that it also opens the door to removing it in the name of big bank competitiveness.”

However, a person close to the review said the lack of a consumer voice was due in part to a lack of proactive engagement from those groups.

“We got good traction with all the banks that were involved. We had conversations with them, they made presentations, we followed up on presentations… so that we really understood what they were telling us and the evidence that was being presented to us,” they said.

“It was actually quite difficult for us to get someone to speak from the customer’s perspective. So, not only individuals, but also small and medium-sized companies. It wasn’t for a lack of trying and looking to get there.”

Others in the City have noted that lobbying tends to be muted around redlining by major banks. Given that they have invested time and money in breaking up their businesses, many may not be willing to undertake another massive undertaking to undo that work so soon.

A financial services partner at a city law firm that works with the major banks said: “The redistricting was a huge problem for the industry, because they spent so many years implementing it. It’s not just, ‘This is a retail client, go here, an institutional client here.’ – There is a lot of overlap. The systems had to be divided. It was a massive project. Having done that, are they going to stir up to change everything?

The source close to the review also said that while the government is pushing to cut regulatory red tape to deliver a Brexit dividend for the city, it did not attempt to influence the redistricting findings.

“The Treasury played with a pretty straight bat,” they said. “There was absolutely no pressure from Treasury to push us one way or the other.

“We certainly don’t think that will lead to a regulatory bonfire that will take us back to the culture that existed in the banking sector before the crash.”

A Treasury spokesman declined to comment on possible timelines for government action on the panel’s recommendations.

An update was expected at the city leaders’ Mansion House dinner on July 19, where former Chancellor Rishi Sunak may now have revealed the government’s post-Brexit plan for financial services regulations.

However, the reform agenda has been called into question by the departure of City Minister John Glen, who spearheaded much of the work.

To contact the author of this story with comments or news, email Justin Cash

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