The City on Thursday won the second clear signal in 24 hours of a political shift in its favour when financial regulators granted a key concession on the ringfencing rule for the UK's largest banks.
In rules set out by the Bank of England, "ringfenced" banks will be allowed to transfer capital from their retail arms to other parts of their businesses in the form of dividends.
The concession is a boon to the UK's largest lenders, which have complained that ringfencing, due to be in place by 2019, puts them at a competitive disadvantage to their overseas rivals. The problem is particularly acute for those with large investment banking divisions.
The BoE's Prudential Regulation Authority is pushing ahead with reforms that will force the largest lenders to separate their retail and investment divisions. This was envisaged as a way of safeguarding UK retail deposits in the face of another financial crisis.
But in its first substantial clarification, the BoE said a ringfenced bank could pass on dividends to its parent group. The BoE's estimate of how much more capital banks would need to comply with the new rules was £3.3bn in aggregate; far less than expected.
A second BoE policy paper on how to wind down a bank — which applies to all UK banks, not just the largest — was also not as prescriptive as some had feared.