Rachel Reeves, the chancellor, has told UK bank bosses she is ‘open-minded’ about reforming the industry’s ring-fencing regime amid a concerted push to abolish the most significant regulatory burden introduced after the financial crisis, Sky News reported on Tuesday.

Sky News said it has seen a letter sent last week by Reeves to the chief executives of a quartet of Britain’s biggest banks, in which she acknowledges their view that adjustments to ring-fencing - which creates a firewall between groups’ investment banking and retail operations - ‘have not gone far enough’.

‘As I have said previously, I am open-minded about the case for further reform,’ the chancellor told the CEOs of HSBC Holdings PLC, Lloyds Banking Group PLC, NatWest Group PLC and Santander UK, part of Banco Santander SA.

Shares in HSBC rose 0.3% to 884.00 pence in London on Tuesday. Lloyds Banking Group was up 1.9% at 77.24p, after earlier hitting a 52-week high of 77.64p. NatWest Group was 1.1% higher at 515.40p, after also hitting a 52-week high of 517.80p. Barclays rose 0.8% at 328.35p, after hitting a 52-week high of 328.70p. Banco Santander was up 0.8% at €7.00 in Madrid.

While Reeves’s response to the bankers stops short of explicitly signalling a willingness to abolish ring-fencing, industry sources believe the Treasury now recognises that there is a clear case for an overhaul of a system which cost billions of pounds to set up, the Sky report said.

The chancellor was responding to a letter from bosses of the four banks who support the scrapping of bank ring-fencing. Barclays was a notable absentee from signing the letter.

On Tuesday, Reuters noted a senior executive at Barclays said he opposed the changes fearing it could undermine financial stability.

‘Such a change could however undermine financial stability and the public’s trust in the sector,’ Vim Maru, chief executive of Barclays UK, told MPs.

But Ian Stuart, head of HSBC’s domestic British bank, argued a change could ‘kickstart growth’.

‘We have two banks in the UK, a ring-fenced bank and a non-ring-fenced one, and we can’t move capital between them... just being able to do that would help businesses in the UK today,’ he said.

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