Recasts, adds Treasury statement in paragraphs 6 and 7

April 26 (Reuters) - Bank ring-fencing should be scrapped to support the UK economy, bank bosses from HSBC HSBA.L, Lloyds LLOY.L, NatWest NWG.L and Santander UK SAN.MC said in a letter to the finance ministry, which said it would work with them to boost growth.

In a letter sent to British finance minister Rachel Reeves this week, first reported by Sky News on Saturday, the chief executives said bank ring-fencing - which separates consumer lending operations from more volatile investment banking - "is not only a drag on banks' ability to support business and the economy, but is now redundant".

A spokesman for HSBC confirmed the letter existed as reported and that the bank was a signatory. NatWest and Santander UK declined further comment on the letter and Lloyds did not immediately respond to a request for comment outside of regular business hours.

The ring-fencing rules were introduced after British taxpayers had to bail out several failing lenders during the 2008 financial crisis.

Banks have long argued that the rules are too onerous and hamper Britain's competitiveness versus other global financial centres. Reeves has stepped up pressure on regulators and other public bodies to remove barriers that might be hindering growth.

A Treasury spokesperson said the banking sector was "critical to delivering our number one priority of economic growth" and indicated the government was open to allowing more risk-taking in support of that goal.

"That's why the Chancellor (Reeves) has set out a new approach to regulation that supports growth, instead of excessively focusing on risk, and why we are co-designing the first-ever Financial Services Growth and Competitiveness Strategy with industry," the spokesperson said.

'UNNECESSARY CONSTRAINTS'

In their letter, the bank chiefs said that given global economic challenges, it was crucial that the government removed "unnecessary constraints on the ability of UK banks to support businesses across the economy and sends the clearest possible signal to investors in the UK of your commitment to reform."

"Removing the ring-fencing regime is, we believe, among the most significant steps the government could take to ensure the prudential framework maximises the banking sector's ability to support UK businesses and promote economic growth", the letter said.

But Bank of England governor Andrew Bailey in February warned that the costs of that global financial crisis should not be forgotten in the backlash against the burden of financial regulation, saying there is no trade-off between economic growth and financial stability.

The Bank of England declined to comment on the letter on Saturday.

(Reporting by Disha Mishra and Rhea Rose Abraham in Bengaluru and Alistair Smout in London; Editing by Alexandra Hudson, Susan Fenton and Gareth Jones)

((Disha.Mishra@thomsonreuters.com;))