Nationwide Building Society has backed plans to reduce demands on the amount of cash regional banks and building societies must keep in reserve, saying it should allow them to put an extra £40bn of loans into the economy.
The chancellor is expected to address capital reforms as part of a wider package of economic boosts in her speech at Mansion House on Tuesday, alongside Bank of England Governor Andrew Bailey.
Capital reserve requirements dictate how much money lenders must keep in reserve to deal with unexpected times of financial crises or economic downturns.
However, this amount will be reduced for low-risk lenders, such as those involved in residential mortgage lending, for example, rather than investment banking or foreign exchange trading, which are much higher volatility markets.
In the case of Nationwide, this change would reduce the amount of capital required from 4.3 per cent to 3.75 per cent, creating the potential to support up to £40 billion in additional borrowing.
That extra cash would flow into the economy through new mortgages and loans and support small and medium-sized businesses.
Dame Debbie Crosbie, chief executive of Nationwide, said: “This reform would boost the economy by unlocking more than £40bn of new Nationwide lending for mortgages and business growth.
“A more proportionate framework would recognize the low-risk nature of lending to building societies, whilst preserving the resilience of the financial system. We are keen to work with regulators to turn that opportunity into real support for the UK economy.”
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Last year, Nationwide was listed as the second largest mortgage provider in the UK, while data from the Building Societies Association suggested that mutuals were responsible for 89 per cent of total mortgage market growth in 2024.
Nationwide already offers business banking services through Virgin Money, although it will also launch business banking under the Nationwide brand in 2027.
Reforms to capital requirements frameworks have been backed by lenders with the expectation that they will support the Government's growth plan, without risking the financial resilience of the entire industry.
That news comes as Rachel Reeves announces additional resources and support for UK SMEs, with £500 million in government funding allocated to “innovative” businesses and startups, to try to close a funding gap estimated at around £2-4 billion a year.
Ms Reeves said: “Our plan for the economy has put Britain in a stronger position – restoring stability, getting investment flowing and delivering reforms.
“We know that small businesses are the backbone of this economy and growth across all our regions, and for too long they have heard 'no' when trying to raise the funds they need to grow and create jobs across the UK.
“When they succeed, we all succeed, and today's big reforms are the most significant step in years to unlock their potential.”
