Banking Chiefs Raise Alarm Over London's Competitive Edge
Senior executives from Britain's largest banks have issued a stark warning about the City of London's future competitiveness, arguing that current regulatory reforms don't go far enough to level the playing field with international rivals.
Speaking before the House of Lords Financial Services Regulation Committee on Tuesday 11 November 2025, Michael Roberts, CEO of HSBC Bank and head of corporate and institutional banking, described the Treasury's deregulation efforts as merely 'a step in the right direction'.
'More needs to be done to enable banks to play our full role in supporting the economy and growth agenda,' Roberts told lawmakers, highlighting particular concerns about how capital requirements are measured.
Capital Requirements Creating Competitive Disadvantage
The banking executive pointed to significant differences emerging between UK and US regulatory approaches. 'There's already a difference today between the UK and US,' Roberts stated, adding 'I assume that will be a greater difference.'
Roberts revealed that UK lenders typically maintain a CET1 ratio - measuring a bank's core capital against risky investments - of approximately 14.5 to 15.5 percent, while global competitors operate at around 13 percent.
'Higher capital requirements are a cost to the bank,' he explained. '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.'
Tax Burden Compounds Competitive Pressures
The regulatory concerns come alongside growing anxiety about the UK's tax environment for financial institutions. A recent study from banking industry body UK Finance and PwC revealed that London lenders' total tax rate increased by 0.6 percent to 46.4 percent in 2025, largely due to Chancellor Rachel Reeves' rise in employer national insurance contributions.
This tax burden dramatically outpaces international competitors. In New York, the equivalent tax rate remained unchanged year-on-year at 27.9 percent - nearly two-thirds lower than the London rate.
Stephen Dainton, president of Barclays Bank and head of investment bank management, who also addressed the committee, raised additional concerns about the forthcoming Basel framework implementation. The UK has delayed its start date to 1 January 2027, awaiting clarity from US regulators.
'There could be a direction of travel where one country moves away from the Basel framework,' Dainton cautioned, '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.'
Private Credit Market Adds to Banking Sector Woes
The regulatory debate unfolds as traditional banks face increasing competition from the rapidly expanding private credit market. Tensions between the two sectors have escalated in recent weeks, with prominent bankers warning of systemic risks.
JP Morgan CEO Jamie Dimon recently highlighted concerns about 'cockroaches' in the sector following the collapse of car parts maker First Brands and subprime auto lenders Primalend and Tricolor within days of each other.
Bank of England Governor Andrew Bailey has also entered the fray, suggesting that behaviour in private lending echoes 'alarm bells' that preceded the 2008 global financial crisis.
Dainton noted that the private credit industry has been 'greatly helped by the fact expensive capital means expensive pricing', adding 'We are much less competitive against firms who don't have any of those requirements, both from a capital and liquidity perspective.'
However, private credit leaders have pushed back against these characterisations. Daniel Leiter, global head of liquid credit strategies at Blackstone, argued last week that '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.'
The debate highlights the complex challenges facing UK banks as they navigate an increasingly competitive global landscape while maintaining financial stability and supporting economic growth.
