Nationwide Building Society has backed plans to lower the demands on how much cash regional banks and building societies must keep in reserve, saying it should enable them to put an extra £40bn of lending into the economy.
The chancellor is expected to address capital reforms as part of a wider package of economic boosts in her Mansion House speech on Tuesday, alongside Bank of England governor Andrew Bailey.
Capital buffer requirements dictate how much money lenders must keep in reserve, to account for unexpected moments of financial shocks or economic downturns.
However, this amount is set to be lowered for low-risk lenders – such as those who are involved with 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 £40bn of extra lending.
That additional cash would enter the economy through new mortgage and lending and backing small and medium-sized businesses.
Dame Debbie Crosbie, chief executive of Nationwide, said: “This reform would boost the economy by unlocking over £40bn of new Nationwide lending for mortgages and business growth.
“A more proportionate framework would recognise the low-risk nature of building society lending while preserving the resilience of the financial system. We are ready to work with regulators to turn that opportunity into real support for the UK economy.”
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Last year, Nationwide were listed as the second-biggest 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 provides business banking services through Virgin Money, though will also launch Nationwide-branded business banking in 2027.
The reforms to capital requirement frameworks have been backed by lenders with the expectation it will support the Government’s growth plan, while not risking financial resilience across the industry.
That news comes as Rachel Reeves announces additional resource and support for UK SMEs, with £500m in government funding allocated to “innovative” firms and startups, to try and close a funding gap estimated to be worth around £2-4bn per year.
Ms Reeves, said: “Our plan for the economy has put Britain on a stronger footing – restoring stability, getting investment flowing, and delivering reform.
“We know that small businesses are the backbone of this economy and growth in 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 major reforms are the most significant step in years to unleash their potential.”