Bank of England holding firm on retail ring fence

Tim Wallace
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THE BANK of England yesterday rejected claims that the incoming ring-fence to separate retail and investment banking is no longer necessary, pressing ahead with its plans to implement the structural changes.

Instead of setting additional hard rules on exactly which activities are in the ring-fence and which are not, the Prudential Regulation Authority said that the details will continue to be discussed on a “case-by-case basis” with banks.

And officials are not changing their plans on governance, which enable the parent company to appoint the board of the ring-fenced entity, but that board must operate independently from the group.

The ring-fence is intended to make sure that if a bank collapses, the vital retail elements, such as savers’ deposits and the payments system, can be protected, while other parts are allowed to fail.

Further consultations are still expected later this year on capital and liquidity requirements for the ring-fenced entities, before final rules are expected in the first half of 2016. The rules come into force in 2019.

It comes after financial policy committee member and ex-Barclays chief Martin Taylor said that it was vital regulators hold firm on regulation and do not ease off on rules just because the sector and economy have recovered.

Banks were not surprised by the document, and one critical banking insider noted: “It just sets out how hideously complicated it all is.”

But industry body the British Bankers’ Association (BBA) welcomed the publication as “a significant step towards the completion of the regulatory regime.”

“The policy statement is granular in nature and clears up a good number of potential ambiguities and gaps in understanding of the planned new arrangements in the areas covered,” wrote the BBA’s Paul Chisnall.

“There is only so far banks can go, however, before they have full sight of the regulatory regime.”

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