October 2008 was a dark month for British lenders. The taxpayer bailouts necessary to avoid another Lehman-style bankruptcy cast a long shadow over the sector. The Royal Bank of Scotland was the costliest collapse and rescue in the world; its chief executive, Fred “the Shred” Goodwin, is still remembered as the unacceptable face of British banking. Only now, 14 years later, is the pall beginning to recede. For the first time since the financial crisis, the government stake in RBS — renamed NatWest Group — is now less than 50 per cent. NatWest’s return to private sector control was rightly heralded by the Treasury as an “important moment” — and an indicator of a bright future for British banking
Whether the second half of that prophecy holds true depends on the pendulum of post-crisis regulation not swinging too far the other way. Short memories, Brexit, the banking lobby, difficult trading conditions brought on by the pandemic and now war, have all given momentum to arguments that now is the time to unpick regulatory precautions in an effort to boost profitability and lower credit costs.
Deregulatory moves are being contemplated by the government. The Bank of England has indicated an openness to relaxing some of its restrictions around mortgage lending. The Treasury is finalising its consultation on the post-Brexit regulatory framework, including whether the Financial Conduct Authority and the BoE should be compelled to ensure the competitiveness of businesses. Sam Woods, a deputy BoE governor, has rightly voiced concern that reviving such a mandate and making it a primary objective would be “genuinely a bad idea”.