Banks meet ministers over lending rules and high street hubs

Britain’s banks are bracing for long-awaited new lending rules from City regulators this week, as well as talks with ministers about improving access to high street services.

On Thursday, the Bank of England’s Prudential Regulation Authority will release its near-final decision on the UK’s approach to implementing tougher global capital standards for lenders, which are known as Basel 3.1 and have been the subject of intense lobbying by the industry.

It is understood that senior bankers have been invited to talks with Rachel Reeves, the chancellor, to discuss the regulator’s highly anticipated plans on the same day they are released.

Separately, The Times has learned that Tulip Siddiq, the City minister, will meet industry executives on the same day to discuss how they can roll out more banking hubs.

These shared hubs, which are run in partnership between lenders and the Post Office and were launched in 2021, are aimed at filling the void left on high streets after the rise of online banking prompted the closure of more than 6,000 bank branches in the past decade. While there are now 76 hubs, the government wants to open at least 350 in the next five years and broaden the services they offer.

There is growing speculation in the banking industry, and corporate Britain more broadly, about how the new Labour government will turbocharge the economy.

Reeves has made boosting economic growth her central priority but has also cautioned about the health of the public finances, claiming that the previous Conservatives government left a £22 billion gap.

Businesses are bracing for tax rises in next month’s budget to fill this fiscal hole, with Sir Keir Starmer warning last month that the “broadest shoulders should bear the heavier burden”. This could include higher taxes on bank profits.

At the same time, the City regulators are also expected to play their part in boosting the economy. The previous government handed the Prudential Regulation Authority and Financial Conduct Authority a secondary objective to facilitate international competitiveness and growth, which has strengthened banks’ hand in lobbying over Basel 3.1.

The tougher capital regulations are part of reforms introduced following the 2007-09 financial crisis to make the banking industry safer and avoid a repeat of that meltdown. European and American regulators are also deciding their approach to implementing the overhaul, and bankers in the UK want to ensure British lenders are not put at a disadvantage. In a boost to UK banks, the Prudential Regulation Authority said in December that its new rules will increase capital requirements by about 3 per cent, half its previous 6 per cent estimate.

The Treasury did not comment on the chancellor’s planned meeting with the banks to discuss Basel 3.1.

The talks with Siddiq come after the City minister wrote to the banking industry last month to raise concerns about “gaps” in the services offered by hubs. She said: “Bank branch closures have a huge impact on customers and on our high streets, which is why this government is committed to working with industry to support the delivery of 350 banking hubs across the UK. This will support in-person banking and help revitalise our high streets.”