HSBC (HSBC) is initiating a push by UK banks to persuade the country's regulators to allow them to use as much as 35 billion pounds ($47.2 billion) of their retail deposits to finance their investment banking activities, Bloomberg reported Friday, citing sources familiar with the matter.

A consent by the government would allow UK lenders such as NatWest Group (NWG), Lloyds Banking Group (LYG), Santander (SAN) UK, and Barclays (BCS) to be on equal footing with foreign banks such as JPMorgan Chase (JPM) and Goldman Sachs (GS), which have no such restrictions, the report said.

The proposal would free up to 175 billion pounds in funding for the UK economy across the five banks, the report said.

The proposal could undermine the purpose of the ring fence, which is requiring the largest banks to separate their core retail banking services from their investment banking activities, the report said, citing a source.

A NatWest spokesperson referred to company CEO Paul Thwaite's earlier comments that ring fencing "can distort decisions and pricing because you have trapped liquidity," and that it could "limit the ability to support the wider growth agenda."

HSBC, Lloyds, Santander, and Barclays did not immediately reply to requests for comment from MT Newswires.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)