The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:
BREXIT: The UK is leaving the EU on Exit Day (as defined in the European Union (Withdrawal) Act 2018). This has an impact on this Practice Note as it will necessitate some changes to ring-fencing legislation. For guidance, see Ring-fencing — explanatory memorandum.
This Practice Note gives a quick overview of the ring-fencing reforms. It covers:
what ring-fencing is and why it has been introduced
a summary of requirements under ring-fencing legislation
an overview of the legal framework and a ring-fencing jargon-buster to explain the terms used in relation to ring-fencing
what banks are doing in practice to implement the regime, and
links to further information on ring-fencing
In brief, the term ring-fencing means the separation by banks of their core retail banking activities from their investment banking activities.
The financial crisis demonstrated how exposure to the global market means that any global financial shock can impact on the solvency of banks that engage in investment activities. Many banks offer both investment and retail services and when a bank gets into financial difficulties this can result in amounts in savings and current accounts held by ordinary depositors being put at risk.
The Independent Commission on Banking chaired by Sir John Vickers recommended ring-fencing as a way of protecting ordinary retail customers (see the
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