Goldman, JPMorgan to win big from British finance reforms

Bloomberg

Goldman Sachs Group Inc and JPMorgan Chase & Co are likely to be among the beneficiaries of the government’s financial services reforms through a proposed relaxation of ring-fencing capital rules that will boost their UK savings arms.
The government said it intends to consult next year on the possibility of increasing the threshold above which lenders must ring-fence their retail operations to £35 billion ($43 billion), up £10 billion. A review by businessman Keith Skeoch earlier this year didn’t recommend raising the threshold, but the government said that it would consider it as the total amount of sterling deposits has grown since the level was set in 2015.
Banks that cross the limit can’t use the funds in riskier investment bank and trading arms. Goldman’s online bank Marcus stopped taking new deposits in the UK in 2020, after it neared the limit. JPMorgan started a Chase UK offering last year and said it had already garnered more than £10 billion in deposits.
The change will mean the two US banks could join those smaller UK lenders without investment banking arms — including Santander UK, Virgin Money and TSB — in having the ring-fencing burden lightened or removed as the UK is also considering taking banks without large investment banking operations outside the ring-fence altogether. The UK’s largest lenders — Barclays Plc, HSBC Holdings Plc and NatWest Group Plc — won’t benefit. Spokespeople for the Treasury, Goldman and JPMorgan declined to comment.
The Treasury announced a package of measures aimed at taking advantage of post-Brexit freedoms and economic developments since the financial crisis to cut red tape and modernise markets to increase the competitiveness of banks, insurers and asset managers based in the UK.
The 30 or so reforms — largely technical in nature — are a far-cry from the far-reaching changes mooted when Liz Truss was prime minister. But supporters say they will have an impact.
Barney Reynolds, global head of the financial services industry group at law firm Shearman & Sterling, welcomed them. “Getting down into the nitty-gritty will be important, since success is to be found there,” he said.
One of the changes that could have a substantial impact is the plan for a UK regime to replace European Union rules over investment products called Packaged Retail and Insurance-based Investment Products – or PRIIPs, according to Chris Woolard, UK Financial Services Regulation Leader at EY.
EU rules on how the products are sold have been criticised for creating excessive and misleading complexity for retail investors, while also forcing providers to include unhelpful information in investments sold to institutional investors.