Structural reform

Structural reform, also known as ring-fencing, will separate banks’ retail banking activities from their wholesale and investment banking activities.

Latest structural reform updates

1 January 2019: Today, structural reform requirements came into effect for banks with more than £25 billion of retail deposits. For further details on structural reform and the policy issued to date please see below.

Background to structural reform

The global financial crisis revealed the need for fundamental changes to how banks are run. In response, the Government developed legislation to require UK banks to separate the provision of core retail services from other activities within their groups, such as investment and international banking. These requirements are known as structural reform or ring-fencing.

The aim of structural reform is to protect UK retail banking from shocks originating elsewhere in the group and in global financial markets. Structural reform is a key part of the Government’s package of banking reforms designed to increase the stability of the UK financial system and prevent the costs of failing banks falling on taxpayers.

For an overview of ring-fencing and how it will affect you, please see the Knowledge Bank article 'Why are retail banks being 'ring-fenced' and how will this affect me?' and 'Ring-fencing: what is it and how will it affect banks and their customers?' Quarterly Bulletin 2016 Q4

What does structural reform change?

Previously, many banking groups provided a mix of services, for example, taking deposits from households and small businesses, mortgage lending, payments processing, corporate lending, investment banking and trading in international financial markets. The risks associated with these activities are very different, but often they were provided alongside each other in the same bank within a banking group. One implication of this was that problems in, for example, investment banking could disrupt a bank’s ability to provide services like taking deposits.

Structural reform makes core banking services - taking deposits, making payments and providing overdrafts for UK retail customers and small businesses - financially, operationally and organisationally separate from investment banking and international banking activities. So if there is a shock to the banking sector, the part of the bank that provides everyday banking services is protected. Banks that have been separated (or 'ring-fenced') from the rest of their groups in this way are known as ring-fenced bodies.

Implementing structural reform

Structural reform requirements came into effect on 1 January 2019 for banks with more than £25 billion of retail deposits. Large UK banking groups must ensure that the structure of their businesses is consistent with structural reform requirements. This means that most adopted new legal structures and ways of operating through large and complex restructuring programmes in 2017 and 2018. A number of banks have restructured their businesses using the 'ring-fencing transfer scheme' (RFTS) restructuring tool. To use an RFTS, a bank needed to have made an application to court (more information is available on the RFTS webpage – however, please note, this page is no longer being updated as the process has ended).

These changes also affected some of the banks’ customers, counterparties and suppliers. For example, the sort codes of some customers changed.

We have finalised the policy required by firms to implement the new regime. This includes final policies on governance, legal entity structures, operational continuity arrangements, prudential requirements, intra-group arrangements, financial market infrastructures and reporting and residual matters. For details of all policy published to date see 'Latest structural reform news and publications'.

Firms required to implement structural reform, ie those that have core deposits in excess of the threshold of £25 billion, or with growth plans that indicate they are likely to meet this threshold, should discuss their implementation of structural reform with their supervisors.

Further information on structural reform

Read about structural reform in the Prudential Regulation Authority Annual Report 2018 and the Prudential Regulation Authority Business Plan 2018/19.

Also see the Financial Conduct Authority (FCA) and HM Treasury information on ring-fencing.

Please see The National Archives for historic structural reform information.

The National Archives

Latest structural reform news and publications

This page was last updated 24 January 2019
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