The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • Ring-fencing—timeline
  • Structural banking reform and ring-fencing
  • Ring-fencing Transfer Schemes
  • Ring-fencing developments

Structural banking reform and ring-fencing

The global financial crisis revealed the need for international structural banking reform. In the UK, the Government introduced a package of banking reforms designed to increase the stability of the UK financial system and prevent the costs of banks failing from falling on taxpayers. The Financial Services (Banking Reform) Act 2013 (FS(BR)A 2013) introduced new provisions into the Financial Services and Markets Act 2000 (FSMA 2000) requiring the largest UK banks to separate within their groups the provision of essential retail banking services from other activities such as investment and international banking. These requirements are known as ring-fencing.

The aim of ring-fencing is to protect UK retail banking from shocks originating elsewhere in a banking group which in turn could have a negative effect on global financial markets. Ring-fencing legislation applies only to UK banks with a 3-year average of more than £25bn in ‘core deposits’ (broadly from individuals and small to medium-sized businesses). Essential banking services which are required to be separated from investment activities as part of ring-fencing are the core services that retail banks offer, including accepting deposits or other payments into an account, offering facilities for withdrawing money or making payments from an account, and overdraft facilities.

Ring-fencing Transfer Schemes

The ring-fencing regime came into effect on 1 January 2019. In preparation for the ring-fencing