Badenoch targets banking regulation overhaul, may challenge Bank of England

Kemi Badenoch, a leading Conservative figure, is set to announce plans for a significant overhaul of UK banking regulations, aiming to dismantle rules implemented after the 2008 financial crisis. Badenoch argues that current regulations, particularly ring-fencing which separates retail and investment banking operations, are stifling economic growth and competitiveness.

Her proposals include scrapping ring-fencing, which has been a point of contention within the City, and replacing the Financial Ombudsman Service with a new independent body. Badenoch also intends to address lender capital requirements, suggesting they should be brought in line with international competitors. This aspect of her plan could put her at odds with the Bank of England's Financial Policy Committee (FPC), which currently sets these requirements.

Badenoch believes these reforms could inject £450bn into the UK economy. She frames her agenda as a 'culture war' against what she sees as an over-regulatory environment, asserting a desire to 'sweep away' a culture where 'every problem needs a new rule'.

Chancellor Rachel Reeves has also initiated reforms to ring-fencing and the consumer redress system. However, Badenoch's proposals suggest a more radical approach, potentially altering the legal framework under which the Financial Conduct Authority and the FPC operate. Industry bodies like UK Finance and TheCityUK have welcomed the engagement on enhancing the sector's competitiveness.