UK structural banking reform—ring-fencing
UK structural banking reform—ring-fencing

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

  • UK structural banking reform—ring-fencing
  • UK banking reform—Financial Services (Banking Reform) Act 2013
  • Implementation of the ring-fencing regime in the UK
  • Key elements of the UK ring-fencing regime
  • PRA and FCA implementation of ring-fencing rules
  • Protection for depositors if a bank fails
  • Loss-absorbency
  • Bail-in
  • Latest UK developments in relation to ring-fencing

This Practice Note outlines the key changes to UK banking reform as adopted by the Financial Services (Banking Reform) Act 2013 (FS(BR)A 2013) including ring-fencing measures which separate retail core services from wholesale and investment banking services.

UK banking reform—Financial Services (Banking Reform) Act 2013

On 18 December 2013, FS(BR)A 2013 received Royal Assent. The Act was designed to:

  1. improve the resilience of UK banks

  2. reduce potential bank failures which will enable the provision of vital banking activities, and

  3. prevent systemic failures in the UK financial system

FS(BR)A 2013 implemented the proposals made in the UK government’s White Paper, ‘Banking reform: delivering stability and supporting a sustainable economy’ on separating retail banking business from investment banking business (the White Paper). For background reading on the White Paper, see News Analysis: UK/EU banking reform—the road to stability?

FS(BR)A 2013 also implemented key recommendations of the Parliamentary Commission on Banking Standards in relation to strengthening individual accountability, such as the introduction of criminal sanctions for reckless misconduct by senior managers that leads to bank failure, additional corporate governance measures and measures designed to support competition in the banking sector (including the creation of a new payment systems regulator). See Practice Note: Financial Services (Banking Reform) Act 2013—essentials and Senior Managers and Certification Regime—essentials for SM&CR banking firms for further information.