Healey tells Bailey to loosen UK banking regulation after tax hike

Chancellor John Healey has urged Bank of England governor Andrew Bailey to ease banking regulations "as quickly as possible" following a tax hike on the sector in the government's Budget. Healey directed the Financial Policy Committee (FPC) to balance its stability mandate with support for economic growth, emphasizing the need for an internationally competitive regulatory framework that promotes competition and does not unduly constrain investment in the UK economy.

He called for accelerated changes to bank capital rules, elimination of overlapping regulations, and relaxation of borrowing caps to boost home buying and mortgage lending. Healey expects the FPC to deliver these reforms promptly, with the committee facing a deadline at its November Financial Stability Report to drive structural updates to UK banking regulations.

The chancellor's bank tax, which doubles the UK banking surcharge to six percent, is expected to generate an additional £1.5 billion for the government over 15 months. Critics, such as JP Morgan and Lloyds finance chief William Chalmers, argue the tax disproportionately targets the industry and lacks principle. The Office for Budget Responsibility (OBR) warns the tax hike will reduce receipts by around £190 million, potentially prompting some banks to move profits abroad.

Healey hopes his letter to Bailey signals his commitment to ensuring a regulatory framework that supports banks' contribution to the UK economy's growth during the winter energy crisis.