Who must comply with ring-fencing legislation?
Ring-fencing rules only apply to UK banks with a 3-year average of more than £25bn ‘core deposits’ (broadly from individuals and small to medium-sized businesses). It is these large banks that must ‘ring-fence’ or legally separate their essential banking services from the rest of their banking group.
Which UK banks are ring-fenced?
As at January 01, 2020, the UK banking groups that include ring-fenced bodies pursuant to section 142A of the Financial Services and Markets Act 2000 are Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander UK, TSB, and Virgin Money UK.
What is ring-fencing clause?
Ring fencing is supposed to shield the assets of the subsidiary from the bankruptcy of its parent or affiliates and allow the subsidiary to obtain or maintain a “standalone” credit rating substantially higher than the lower credit rating of its parent.
Why are banks ring-fencing?
The aim of ring-fencing is to protect UK retail banking from shocks originating elsewhere in the group and in global financial markets. It covers banks with more than £25 billion of core (retail and SME) deposits.
When was ring-fencing introduced in the UK?
1 January 2019
Ring-fencing came into force on 1 January 2019. It requires the largest banking groups’ to separate core retail banking services from activities such as investment and international banking.
Are universal banks prohibited in the UK?
Universal banks, commercial and retail banks The RFB will be prohibited from certain activities such as dealing in complex derivatives, principal and commodity trading activities and operating branches and subsidiaries outside the EEA.
Is HSBC UK ring-fenced?
To comply with ring-fencing, HSBC separated its retail banking operations from its wholesale and investment divisions and changed the way HSBC is structured in the UK, including creating a new, ring-fenced bank, HSBC UK.
What is Lloyds ring-fenced?
The new rules meant large UK banks needed to separate personal banking services provided in the UK and EEA, such as current and savings accounts, from risks in other parts of the business, like investment banking and personal banking activities provided outside the EEA. This is called “ring-fencing”.
When is ring fencing required in the UK?
As of 1 January 2019 the largest UK banks are required by UK law to separate core retail banking services from their investment and international banking activities. This is known as ring-fencing.
Who is the lead regulator for ring fencing?
The Prudential Regulation Authority (PRA) is the lead regulator for ring-fencing. It is responsible for identifying which banks are within the scope of the ring-fencing legislation, and for supervising banks’ implementation of the prudential rules.
What did ring fencing do to the banks?
The changes required by the ring-fencing rules resulted in a number of the largest banks carrying out a restructuring to separate their retail banking activities. This involved transfers of parts of the business to other parts of the group through a court process known as a ring-fencing transfer scheme.
How does ring fencing change the supervisory approach?
Ring-fencing does not change the fundamental principles of our supervisory approach. However, it could require more intensive supervisory engagement for groups in scope of the new regime because of the new legislative and regulatory requirements and the new entities we need to supervise.