After a bruising market reaction to his mini-Budget in September, then-chancellor Kwasi Kwarteng told banks and financial services bosses he wanted to introduce a ‘Big Bang 2.0’ package of reforms to make the City a more attractive place to invest.

Readers with a long memory will recall the original Big Bang back in October 1986, which deregulated the financial markets and ushered in a wave of takeovers of old-style partnership firms by large foreign buyers as well as moving share trading onto an automated platform.

‘Big Bang 2.0’ includes ambitious plans such as a reversal of the rules forcing banks to separate their retail arms from their riskier investment banking businesses.

These rules, brought in after the Great Financial Crisis, at the same time as the US Dodd-Frank Act, were designed to make the financial system safer for investors and taxpayers by preventing banks from over-leveraging themselves.

The Financial Services & Markets Bill, designed to replace EU banking rules, is currently before Parliament and proposes changing the ring-fencing rules in order to free up so-called ‘trapped capital’ held by the banks.

However, Financial Times columnist Martin Wolf argues promoting competitiveness by relaxing regulations ‘will start the journey down a dangerously slippery slope’, risking another financial crisis, because the UK banks are still insufficiently capitalised.

‘Banks built on upside-only bets for their decision makers are sure to crash,’ warns Wolf.

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