BLUE-CHIP banks soared yesterday on news that regulatory reforms were expected to be watered down.

P a r t - n a t i o n a l i s e d Lloyds Banking Group led the charge with a gain of nine per cent, while Royal Bank of Scotland and Barclays soared eight per cent as investors cheered the prospect of more lenient restrictions on capital standards in the sector.

With decent results from UBS helping the positive sentiment, the FTSE 100 Index rose 14.6 to 5365.7, despite huge second quarter losses for oil firm BP.

Wall Street’s Dow Jones Industrial Average struggled to make headway as figures showed consumer confidence at its lowest since February, which offset more decent earnings figures – this time from chemicals maker DuPont.

The pound hit a fresh five-month high against the dollar – to more than £1.55 – as sterling continued to strengthen, helped by robust UK retail sales.

But it was BP in London grabbing the headlines once more.

Shares fell 11p to 406p after it plunged into the red for the first time in 18 years following a massive £20.8bn provision for the Gulf of Mexico oil spill.

Investors also had to digest the resignation of chief executive Tony Hayward and details of the company’s plans to sell $30bn in assets as it looks to concentrate on higher growth exploration and production.

But fresh from its clean bill of health after last week’s European stress tests, UK bank stocks were making the running.

Barclays jumped 23.9p to 339.6p, while Lloyds Banking Group lifted 5.8p to 71.8p and Royal Bank of Scotland surged 3.7p to 50.4p.

There was also a rise of 25p to 552½p for insurer Prudential and a gain of 8.4p to 363½p for rival Aviva.