UK banks send regulation warning as private credit threat rises
Top bosses of UK banks have fired a warning shot over the country’s status as a competitive financial hub as the government’s efforts to overhaul regulation risk missing the mark.
Michael Roberts, the top boss of HSBC Bank and chief of corporate and institutional banking, told lawmakers on Tuesday the Treasury’s deregulation work was a “step in the right direction” but urged “more needs to be done to… enable banks to play our full role in supporting the economy and growth agenda”.
“I think more in terms of looking at how we measure capital… I think that will put a competitive strain on UK banks in particular when you look at whats happening in the United States,” he added.
The US has brought in major reforms under President Donald Trump’s deregulation drive to reduce the requirement big banks must hold in high-quality capital that serves as a back-stop and safety buffer.
“There’s already a difference today between the UK and US,” Roberts added, “I assume that will be a greater difference”.
The banker said UK lenders generally run a CET1 ratio – a measurement a bank’s core cash and profits against its risky investments – of around 14.5 to 15.5 per cent, whereas global counterparts fall at 13 per cent.
“Higher capital requirements are a cost to the bank… the higher the capital the more expensive that capital becomes, the more restrictive it is to lend out our balance sheet.”
“It’s a simple math problem,” he added.
Morning Wire reported earlier this month analysts had raised concerns that the Treasury’s deregulation package would fail to move “the dial” materially and spur economic growth.
Banks facing outsized tax rate
The warnings come as banks also faced increased competitive pressures from the hefty tax rate for London lenders.
A study from banking industry body UK Finance and PwC revealed London lenders’ total tax rate rose 0.6 per cent to 46.4 per cent in 2025, namely due to Rachel Reeves’ increase to employer’s national insurance contributions.
This dwarfed that of overseas rivals and has spiked concerns about the City’s attractiveness on the global stage. In New York, the tax rate remained unchanged year-on-year at 27.9 per cent, almost two-thirds below that in London.
In the same House of Lords Financial Services Regulation Committee session, Stephen Dainton, president of Barclays Bank and head of investment bank management, said the forthcoming Basel framework could help further splinter competitiveness.
The Basel Framework is an international rulebook for banks, set by global regulators, to ensure all major banks hold enough high-quality capital and liquidity to survive a crisis without needing a government bailout.
Whilst a majority of the rules have been implemented, the last major package of reforms – focusing on how banks calculate risk – was delayed from 2023 and is being phased into different hubs over the next few years.
The US has floated a ‘Basel III Endgame’ proposal, which is facing industry pushback, whilst the UK has delayed its start date to January 1 2027 awaiting clarity from across the Atlantic.
“There could be a direction of travel where one country moves away from the Basel framework and I think it’s extremely important that the UK watches the circumstances that evolve… and ensure that we as a banking system in the UK are not disadvantaged,” Dainton said.
Private credit and bankers’ war of words
The regulation row come as banks feel the heat from a rising private credit threat.
Bubbling tensions between the two industries have flared up in recent weeks, with top bankers warning of a financial crisis-level threat in the private credit market.
JP Morgan boss Jamie Dimon warned of “cockroaches” after car parts maker First Brands and subprime auto lenders Primalend and Tricolor all collapsed in a matter of days under ballooning debts.
Governor of the Bank of England Andrew Bailey also entered the fray, warning the behaviour demonstrated in private lending echoed the “alarm bells” that foreshadowed the 2008 Global Crisis.
Dainton said the private credit industry had been “greatly helped by the fact expensive capital means expensive pricing”.
“We are much less competitive against them firms who dont have any of those requirements, both from a capital and liquidity perspective,” he added.
Last week a trio of bosses from private credit lenders branded the string of recent discourse around their industry’s role in the recent collapses “misinformation”.
Daniel Leiter, global head of liquid credit strategies at Blackstone, said “the system will be more stable whenever we do go through economic shocks, because now, away from just relying on the banking system, private credit can provide a source of financing through difficult times.”
“What is happening in private credit is safer… than on banks’ balance sheets,” he added.