Goldman targets UK savers in risky £100bn cash grab
GOLDMAN Sachs wants to raise up to £100 billion from British savers to pump into its investment bank.
Currently, big banks with more than £25 billion on deposit from savings and current account customers cannot use the funds in their investment bank and trading arms.
The Mail on Sunday understands that US giant Goldman Sachs has called on an official review panel to relax these tough ring-fencing rules, and has lobbied for the threshold to rise to £100 billion before the restrictions kick in. That would enable it to use billions more pounds from UK customers for risky investment bets.
A source said the £25 billion threshold could delay Goldman Sachs from launching a current account in the UK through its digital Marcus brand. Goldman Sachs is understood to have been considering a UK current account, but sources said it fears that doing so would push its deposits above the threshold. Marcus, which offers a savings account, has attracted £21billion from British customers with leading interest rates. It paused new applications in the summer to limit inflows.
Ring-fencing was brought in after the global financial crisis to protect savers and current account customers, when it emerged that banks had put ordinary savers’ deposits at risk by funnelling them into their ‘casino banking’ operations, where traders made high-risk bets on the housing market that turned sour.
The Treasury commissioned a review of the rules in April, even though the protections only came into force in 2019. The review panel, led by City veteran Keith Skeoch, is expected to make an announcement next month on the impact of ringfencing on the mortgage market and competition in banking.
Sources said other banks with large investment banking operations have not lobbied for the limit to be increased. One banker said: ‘HSBC and Barclays can’t use their retail deposits to fund [trading] because they’re all above £25billion. But institutions that remain below that can raise retail deposits in the UK and use them to fund trading. It’s very unusual to have a rule that favours competitors over domestic [banks]. The debate is: do you make the [loophole] bigger, or reduce it?’
The review panel can recommend increasing or decreasing the limit. The latter would hit foreign banks and fast-growing lenders in the UK. A cut would also hit US giant JP Morgan, which launched British digital bank Chase in September.
UK Finance, the body representing banks, has called on the review to consider dismantling ring-fencing if the panel finds evidence that its cost outweighs its benefits.
But Sam Woods, deputy governor of the Bank of England, who helped devise the rules, said he would defend them to his ‘last drop of blood’. Goldman Sachs declined to comment.