Good afternoon ladies and gentlemen and welcome to the UK Finance growth summit. It is a real pleasure to see so many senior colleagues here today, and to welcome such a strong line up of speakers. I expect a rich and rewarding debate. I must thank VISA for their sponsorship of today’s event.

A year ago we developed the Plan for Growth in collaboration with our 300 members. It was an example of the industry pulling together, to come up with ideas that really benefit society, and support the government’s growth agenda. I was delighted when many of the ideas formed a large part of the Leeds reforms, and the Mansion House speech.

Given the incredibly uncertain world we live in, and the consequences of this uncertainty for the UK economy, I believe it is vital that we continue to focus on the growth agenda. Growth brings with it positivity, improved living standards, and greater stability. Banking and finance sit right at the heart of that push for growth. Our plan contained over 60 recommendations, and the ambition was to reset the regulatory landscape to help drive economic growth.

A year on, we have achieved a good deal of what we advocated for. The government really listened. I want to pay tribute to the Chancellor and to the City Minister for sticking to the agenda and pressing ahead with reform. Lucy has kindly agreed to speak today. Thank you for all your hard work on this vital agenda.

It is now time to turn the plans into reality and so we have produced a follow up document entitled “From strategy to delivery”. Once again, this work has had input from a wide range of members.

Growth sounds good. It is a positive word. But, ultimately, what it really translates to is lower mortgage costs, more businesses backed, more homes built, and stronger financial resilience for households.
Something we can all feel. As opposed to some distant academic concept.

The industry already reaches every part of the country. It provides £1.7 trillion in mortgages, almost £200 billion in lending to SMES with significant additional funding from asset and invoice finance.

And it makes over 50 billion payments each year.

We want to build on these huge numbers and get the UK growing.

We have structured the report, not as a laundry list of asks or whinges, but instead as a practical document which seeks to build on, and enhance, the existing government growth agenda.

We have identified nine growth enablers and explicitly linked these back to existing government strategies such as housing, infrastructure, trade and national security.

The plan contains mutually reinforcing reforms to financial services that will have the most impact for people, businesses and communities across the UK.

It would take too long to work through all nine enablers so let me discuss just four for a few moments. The others are just as important.

I will start with reducing bank capital requirements.

Since the global financial crisis the amount of capital held by banks and building societies has increased significantly.

Alongside increased capital we now have a ring fencing regime, a senior management regime and pro cyclical accounting treatments. For example, on SME lending IFRS9 means banks now have to assume 20-30% of startups will go out of business and immediately book the loss. This impacts the amount of capital held.

The cost of capital and funding for the same SME risk has more than doubled since the financial crisis. Banks have to price that into the lending, based on PRA rules.

Then, there is also the application of Consumer Duty to many small businesses, and the constraints on what banks can do to support a business back to financial health when they get into trouble. As a result, not only is SME lending more expensive today, but many businesses don’t even get offered a loan that the Banking sector would previously have supported.

So, how would a capital reduction help? It will allow the banks and building societies to lower pricing on the relevant types of lending. It will also allow them to compete more effectively for capital globally.

Reducing capital requirements lowers hurdle rates, enabling more lending, even if shareholders receive distributions. This mechanism works regardless of whether profits are retained or paid out. As the structural cost of intermediation falls, loan pricing adjusts, capacity expands, and cost of equity declines over time, reinforcing the effect.

The Financial Policy Committee have already concluded that 13% is the appropriate level for Tier one bank capital with CET1 at 11%.

The data illustrates why translating the new benchmark into lower binding requirements matters. Current CET1 ratios of large UK banks stand at 14.6% in aggregate. Even in very severe stress, capital levels would fall only to around 11%, the level the FPC regards as an appropriate steady state.

However, the FPC’s revised benchmark does not automatically translate into lower requirements for individual banks.

Banks cannot easily use management buffers to support additional lending, because investors, rating agencies and counterparties expect them to remain comfortably above their minimum requirements thus exacerbating the issue.

Unlocking more long-term finance for productive investment is a priority for the government. So, we believe the PRA and FPC should now act to make the FPC’s judgement real, by translating the benchmark into lower effective capital requirements while maintaining the resilience of the system.

Other jurisdictions are not standing still. US regulators have stepped back from original proposals to increase capital requirements under Basel 3.1. There, policymakers have emphasised the need to balance resilience with the ability of banks to support economic growth. US banks’ excess capital, which can now be deployed into the US economy, is estimated at $320 billion following the US reforms.

The EU is implementing Basel 3.1 more gradually and with greater flexibility. EU institutions are clear, that capital rules should support competitiveness and investment as well as stability.

A real change, which translated into capital reductions at individual bank level, would send a signal that it is OK for a small rebalancing of risk appetite. I would never push for some large swing back to 2007. I believe that not just signalling that we have reached “peak capital” but going further, and making the changes we have outlined, will send a strong message and support growth.

The changes we propose will impact the government’s housing strategy, its infrastructure strategy, and its SME plan. A relatively small increase in risk appetite on the part of regulators could allow significant growth. I urge them to be bold and positive.

The next enabler I want to highlight is “strengthen tech and telecom firms’ fraud obligations”.

I think that the government’s fraud strategy sets the right direction, and I applaud Lord Hanson for pushing this forward.

However, the telecoms and tech companies should have greater obligation to prevent fraud. Over 80% of APP fraud emanates from their networks and platforms.

I want to see Ofcom implement proactive fraud prevention obligations, through delivery of fraudulent advertising rules, under the auspices of the Online Safety Act.

I think the government could, and should, introduce mandatory seller verification in online market places. Fraud is growing, and now represents 45% of all crime. It funds drugs, people trafficking, other serious organised crime, and is a threat to national security. It literally drains cash out of the UK, from law abiding consumers and businesses, who ultimately pay for this scourge. It blights people’s lives. Tackling fraud will help growth as trust returns and the cash drain is stemmed.

Addressing this issue supports the government’s fraud, financial inclusion, and national security strategies. There is one particular firm that could do a huge amount more, and we have joined forces with trade associations in the USA, Canada and the EU to take the argument to them. This could yield some really positive results.

An example of what the industry is doing with tech companies who take this seriously can be seen at HSBC. They are applying AI and advanced analytics to enhance core financial crime controls.

This means the bank can focus its attention on the activity that matters most. Built through a long-term partnership with Google, this Dynamic Risk Assessment capability is now live in 30 markets, covering 95% of all HSBC customers. The system uses AI models to analyse large volumes of customer and transaction data, to identify unusual patterns.

Another example of the industry work on scams and fraud is the Metro Bank Scam Checker, becoming the first bank to partner with the award-winning AI tool, Ask Silver, to support its efforts to protect customers from fraud.

The Scam Checker uses technology to help customers assess whether they may be at risk of a scam. Customers can simply take a photo or screenshot of any email, website, letter, or leaflet they find suspicious and send it via WhatsApp or through the Metro Bank website.

This approach has helped protect over £1million of customer funds. The next enabler is “support payments modernisation and innovation”.

The national payments vision has set a very welcome, and clear, direction. The priority now, is to turn the vision into tangible action, swiftly. We are supporting Vim Maru, Chief Executive of Barclays UK, as he sets about creating the Delivery Company, which will provide the underpinning for all retail payment developments.

We are on the cusp of real change in the technology that supports payments. UK Finance is leading the project to develop the GB Tokenised Deposit as it moves into pilot.

There are three use cases to be tested in a live pilot. The first is account to account payments. Here fraud could be squeezed out through use of block chain technology and digital verification.

The second use case is the complex house buying process and the third is digital bond trading. This work in payments, will allow us to regain world leadership and supports many different government strategies and plans.

My plea, is that the government allow industry to innovate, and put capital at risk. This way lies growth. If there is no commercial model, there will be no innovation and no growth. Now is the time to embrace change, and let the regulators take one step back to allow industry to deliver.

The final enabler I would like to discuss is “broaden financial inclusion for individuals and households”.

One of the consequences of almost twenty years of caution, capital build up, and increased regulatory burden, is that more people and businesses face financial exclusion.

A desire to radically reduce risk to individuals has resulted in a different kind of risk crystalising. One where a group of people are effectively shut out. An example of this, is the provision of investment advice. The roll out of targeted support is designed to address this, and it is a great step forward.

The reduction in capital I discussed earlier is a pre requisite for lending to a larger population, and greater inclusion.

The sector is doing a lot to enable greater financial inclusion. When I joined UK Finance in 2021, the first thing I focused on was access to cash. We recognised that there was a need to continue providing cash services, despite cash usage dwindling, and more and more people banking digitally.

The industry came together, voluntarily, to address this issue as bank networks were changing due to customer behavioural shifts.

We decided to pursue cash back without purchase, which is now widely available, and can support community cash recycling.

We also pioneered the concept of shared hubs, which had been piloted in two locations but which were not really gaining traction. UK Finance led the work to form Cash Access UK with the drive and enthusiasm of Natalie Ceeney as Chair.

To give you some idea of the level of involvement we had, while the company was being formed, I personally signed the leases for the first few hubs to get them open.

We have since seen Cash Access UK go on to open over 220 banking hubs across the country, which builds on banks’ existing, in person, networks. It is an example of the industry leading the way and protecting vulnerable customers.

So, that is just four of the nine enablers covered. Together, they support the government’s growth strategies and, if implemented, will deliver real change.

For the best part of twenty years we have seen regulatory tightening and risk aversion become the norm. The result? Anaemic growth.

By easing capital requirements and giving greater certainty to firms, we will attract capital.

With industry leading in digital innovation and payments, and also able to make a commercial return, we will attract capital.

By driving inclusion, home ownership, and the green agenda, we will attract capital.

By making the tech companies contribute to fighting fraud, we will restore confidence, tackle serious crime, and attract capital.

By reducing the cost of regulation, we will attract capital.

And by attracting capital, we will deliver growth, and greater prosperity for the country. Prosperity that will be felt in homes up and down the land.

Now, is the time to move from Strategy to delivery. Thank you.