21 September 2020: We published the Proprietary Trading Review, as required by FSMA (2013). The report reviews the extent of proprietary trading engaged in by PRA-authorised deposit takers and investment firms incorporated in the UK.
This page was produced before the UK’s withdrawal from the EU. The UK has now entered into a transition period, due to end on 31 December 2020, during which EU law will continue to apply. We will update this page at a later date, as appropriate, to reflect the legal and regulatory framework applicable at the end of the transition period.
Background to ring-fencing
The global financial crisis revealed the need for fundamental changes to how banks are run. As part of its response to the crisis, the Government developed legislation to require UK banks to separate the provision of core retail services from other activities within their groups. These requirements are known as structural reform or ring-fencing. Ring-fencing 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.
The aim of ring-fencing is to protect UK retail banking from shocks originating elsewhere in the group and in global financial markets. It covers banks with more than £25 billion of core (retail and SME) deposits. Under the new regime, core banking services – taking deposits, making payments and providing overdrafts for UK retail customers and small businesses – become financially, operationally and organisationally separate from investment banking and international banking activities. Banks that have been separated (or 'ring-fenced') from the rest of their groups in this way are known as ring-fenced bodies.
The Implementation of ring-fencing
Ring-fencing regime came into effect on 1 January 2019. All banks in scope of ring-fencing completed the necessary implementation activities, and £1.2 trillion of core deposits were placed in ring-fenced banks. To ensure the structure of their business is compliant with structural reform requirements, over 2017-2018, the banking groups in scope adopted new legal structures and ways of operating through large and complex restructuring programmes. Many banks restructured their business using the 'ring-fencing transfer scheme' (RFTS) process.
The final policies that firms were required to implement can be found under ‘Latest structural reform news and publications’. 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.
In future, more banks may be required to ring-fence if they pass the threshold of £25 billion core deposits (measured on a three-year rolling average basis) either through organic growth or via acquiring another bank. Any firms that are expected to meet this threshold should discuss their plans to become compliant with ring-fencing with their supervisors as early as possible.
The list of ring-fenced bodies are available on our 'Which firms does the PRA regulate?' page.
The supervision of groups in scope of ring-fencing
Ring-fencing does not change the fundamental principles of our supervisory approach. However, it could require more intensive supervisory engagement for groups in scope of the new regime because of the new legislative and regulatory requirements and the new entities we need to supervise.
Our focus in the early post-implementation period has been on ensuring the ring-fencing arrangements that have been established by firms are effective in practice, and remain so. In addition to checking the compliance with the new legislative and regulatory requirements, we will continue to test the effectiveness of the firms' ring-fencing control environment, the robustness of the financial position of ring-fenced subgroups, and their ability to make decisions independently.
More information on the way we carry out our role in respect of deposit-takers and designated investment firms, including ring-fenced banks, can be found in the PRA's approach to banking supervision.
Regulatory reporting related to ring-fencing
Banking groups with a ring-fenced entity are required to submit additional regulatory returns. These include the addition of RFB sub-group reporting for existing in-scope returns, and the addition of new RFB00x returns. Information on the ring-fencing regulatory reporting requirements can be found on the Regulatory reporting – banking sector webpage.
Further information on ring-fencing
For an overview of ring-fencing and its impact on banks and their customers, see 'Ring-fencing: what is it and how will it affect banks and their customers?' Quarterly Bulletin 2016 Q4 and 'Why are retail banks being 'ring-fenced' and how will this affect me?'
For more information on RFTS, see the PRA’s approach to RFTS.
We are required by the Financial Services (Banking Reform) Act 2013 to report annually on certain aspects of ring-fencing compliance. The Prudential Regulation Authority Annual Report 2019 for the first time included a section on ring-fencing. You could also read about ring-fencing in the Prudential Regulation Authority Business Plan 2019.
Please see The National Archive for historic structural reform information, including detailed policy development news from 2014-2017.
6 June 2019: From 1 January 2019, the PRA’s general safety and soundness objective has been amended to reflect the aims of structural reform (also referred to as ring-fencing). The PRA’s first report on certain aspects of ring-fencing is set out in the ‘Complying with FSMA’ section of the PRA Annual Report 2019. We also published a list of ring-fenced bodies as at 1 January 2019 available on Which firms does the PRA regulate?
1 May 2019: We published 'Systemic Risk Buffer rates for ring-fenced banks and large building societies' (applicable from 1 August 2019).
15 April 2019: We published the PRA's Annual Business Plan 2019, which included an update on structural reform.
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.
13 December 2018: We published Policy Statement 32/18 ‘The system risk buffer: Updates to the Statement of Policy’ and an updated Statement of Policy ‘The PRA's approach to the implementation of the systemic risk buffer’.
5 December 2018: We published Policy Statement 30/18 ‘Regulatory reporting: Responses to CP16/18’, updated SS34/15 ‘Guidelines for completing regulatory reports’ and SS32/15 ‘Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082, and PRA 111’. This includes links to templates and instructions which have been updated to reflect their application to ring-fenced bodies, also available on the Regulatory reporting – banking sector page.
26 November 2018: We published ‘From construction to maintenance: patrolling the ring-fence’ a speech by James Proudman, Executive Director of UK Deposit Takers Supervision, about ring-fencing and its implications for the banks and the PRA.
22 November 2018: We published Consultation Paper 29/18 ‘The systemic risk buffer: Updates to the Statement of Policy’. Given the minor nature of the proposed updates, this consultation closes on Thursday 6 December 2018.
14 November 2018: We published Policy Statement 28/18 ‘UK leverage ratio: Applying the framework to systemic ring-fenced bodies and reflecting the systemic risk buffer’. This includes:
- final rules for the Leverage Ratio, Public Disclosure, Reporting Leverage Ratio, and Ring-fenced Bodies Parts of the PRA Rulebook;
- updated Supervisory Statement (SS) 45/15 ‘The UK leverage ratio framework’;
- updated SS46/15 ‘UK leverage ratio: instructions for completing data items FSA083’; and
- FSA083 Leverage Ratio Reporting template, and reporting instructions, available on the Regulatory reporting – banking sector webpage.
We have also published ‘Additional Leverage Ratio Buffer Model Requirements’ on the SS45/15 webpage.
The changes to the rules and expectations, and all other materials published today, will take effect from Tuesday 1 January 2019.
31 October 2018: We published the ‘Ring-fencing: Summary of regulatory reporting requirements’ pack which summarises the new regulatory reporting, and reporting system requirements in relation to ring-fencing. The pack is aimed at UK banking groups in scope of structural reform requirements that will be required to submit ring-fencing regulatory returns from 1 January 2019.
12 September 2018: We published Consultation Paper (CP) 19/18 ‘Regulatory Reporting: EBA Taxonomy 2.9’. This CP sets out proposals to update certain PRA reporting requirements to reflect relevant proposals made by the European Banking Authority (EBA) in its open consultations on changes to the Implementing Technical Standards (ITS) on Supervisory Reporting.
This consultation closes on Wednesday 12 December 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP19_18@bankofengland.co.uk.
3 July 2018: We published Consultation Paper (CP) 14/18 'UK leverage ratio: Applying the framework to systemic ring-fenced bodies and reflecting the systemic risk buffer'. The CP proposes to apply the systemic risk buffer (SRB) framework in the UK leverage ratio framework.
This consultation closes on Tuesday 25 September 2018.The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP14_18@bankofengland.co.uk.
23 February 2018: We published updated versions of RFB001 to RFB008 instructions. The ‘Units’ section in each set of reporting instructions has been updated to clarify the precision required for reporting. The updated instructions can be found on Regulatory reporting – banking sector.
22 February 2018: We published updated details of banks’ ring-fencing transfer scheme court dates and the case reference numbers for each scheme:
For more information on how to serve written statements (objections) to the PRA on RFTS, see Written statements to the PRA on RFTS.
12 February 2018: We published updated details of banks’ ring-fencing transfer scheme court dates. This was updated on Thursday 22 February, and is available above.
7 February 2018: We issued a modification by consent of Fitness and Propriety 2.7 so that firms subject to ring-fencing may apply to be exempt from having to obtain regulatory references from firms outside their group in respect of certain intragroup employee transfers linked to ring-fencing transfers.
10 November 2017: We published updated details of banks’ ring-fencing transfer scheme court dates. This was updated on Monday 12 February, and is available above.
18 October 2017: We published updated details of banks’ ring-fencing transfer scheme court dates. This was updated on Friday 10 November, and is available above.
18 September 2017: The Bank published a public working draft (PWD) of the standalone ring-fencing taxonomy that will make up part of v3.0 of the Bank of England Banking XBRL Taxonomy, alongside related technical artefacts. This follows Policy Statement 3/17 ‘The implementation of ring-fencing: reporting and residual matters – responses to CP25/16 and Chapter 5 of CP36/16’. See the Taxonomy section in the Regulatory Reporting - banking webpage for more information. The PRA also confirms that the GABRIEL system will be used to collect ring-fencing reporting data.
15 September 2017: We published details of banks' ring-fencing transfer scheme court dates. This was updated on Friday 10 November, and is available above.
For more information see 'Implementing structural reform' above.
20 July 2017: We published PS19/17 'Responses to CP2/17 Occasional Consultation Paper’ which includes policy on structural reform, including updated RFB001 to RFB008 templates and instructions.