Stages of Tax Grief, Stages of Rate Policy

Banks are having a bad month. Chancellor John Healey has gone coy on bank tax rises ahead of the Budget, and the industry is doing what every taxed sector does when cornered: negotiating. Meanwhile, over at the Bank of England, a separate conversation is happening that banks might want to pay closer attention to — one where their own resilience is quietly being questioned.

Two pressure points. One sector. No easy way to play both sides.

The Bargaining Stage

City AM's column this week lays it out plainly: banks are in the Budget firing line, and a Tuesday meeting between bank bosses and the chancellor produced nothing but non-answers on rate rises. As Samuel Norman notes in his piece on the stages of tax grief, the sector appears to be moving from denial into bargaining — the stage where everyone starts floating trade-offs instead of outright objections.

That's a rational response to a tax rise that looks increasingly likely. Banks will offer concessions — lending commitments, investment pledges, softer language about competitiveness — in exchange for a smaller hit. It's a well-worn playbook.

The problem is that bargaining only works if the other side needs something from you. And right now, it's not obvious the government does.

What the Bank of England Isn't Saying

While banks negotiate with the Treasury, a quieter document landed with less fanfare: the minutes from the Bank of England's Market Participants Group meeting on 24 September 2026.

The MPG exists to give senior market participants a direct line to the Monetary Policy Committee — a forum for candid views on market themes, not a place for political theatre. That's precisely why the tone matters.

The minutes don't scream crisis. But they don't read as reassuring either. There's a thread of scepticism running through the discussion about how resilient the banking sector actually is under current conditions — scepticism that sits awkwardly next to an industry currently arguing it can't absorb a tax increase without consequence.

You can read that two ways:

Banks are overstating fragility to strengthen their Budget negotiating position, or
The resilience concerns are genuine, and the tax argument is a distraction from a harder conversation about capital and risk.

Either reading is uncomfortable. Neither helps the sector's case.

Two Fronts, One Balance Sheet

Here's the sharper point. You cannot simultaneously argue you're too fragile for a tax rise and too resilient for rate-policy scrutiny. Pick one.

If banks lean into the fragility argument with the Treasury, they invite closer scrutiny from the Bank of England's own participants group — the people whose job is to flag exactly that kind of vulnerability to the MPC. If banks instead lean into strength and stability to keep the BoE off their backs, they weaken their own Budget bargaining position.

This is the trap of running two negotiations at once without aligning the message.

The Stages, Mapped

Norman's framing of tax grief maps neatly onto how banks appear to be handling both fronts simultaneously:

Denial — insisting no tax rise is necessary or justified.
Anger — public pushback via trade bodies and lobbying.
Bargaining — the current stage: trade-offs, concessions, conditional cooperation.
Depression — quiet acceptance that some rise is coming, paired with lowered forecasts.
Acceptance — adjusting balance sheets and strategy to the new reality.

Most of the sector sits at stage three on tax. But on rate policy and resilience, the Bank of England's own participants seem to be asking questions that suggest stage one or two hasn't even started — the industry hasn't fully reckoned with how its resilience is being perceived at the policy level.

Why This Matters Beyond the Budget

This isn't just a tax story. It's a credibility story.

Regulators and chancellors both respond to coherent signals. A sector that argues fragility to one audience and strength to another doesn't come across as strategic — it comes across as inconsistent, and inconsistency invites more scrutiny, not less.

Fintechs, by contrast, are pulling ahead on customer experience while incumbent banks are consumed by negotiating posture on two separate fronts. That's not a coincidence. Attention spent managing competing narratives is attention not spent on the product.

Key takeaways

Banks are bargaining hard over Budget tax rises, but the Bank of England's Market Participants Group minutes show quiet scepticism about sector resilience — a message that cuts against the fragility argument.
Running contradictory narratives on two fronts — fragile for tax purposes, resilient for policy purposes — undermines credibility with both the Treasury and the Bank of England.
The "stages of tax grief" framework shows banks firmly in the bargaining stage on tax, but still early-stage in reckoning with how regulators actually view their resilience.
Fintechs are gaining ground on customer experience while incumbents are distracted managing dual negotiations — a cost that rarely shows up on a balance sheet but shows up in market share.