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

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: 

PDFRing-fencing transfer schemes - dates for banks' court hearings

For more information on how to serve written statements (objections) to the PRA on RFTS, see Written statements to the PRA on RFTS

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 will structural reform change?

Today, many banking groups provide 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 are provided alongside each other in the same bank within a banking group. One implication of this is that problems in, for example, investment banking could disrupt a bank’s ability to provide services like taking deposits.

Structural reform will result in core banking services — taking deposits, making payments and providing overdrafts for UK retail customers and small businesses — being financially, operationally and organisationally separated 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 will be 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 will apply, from 1 January 2019, to 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 will need to adopt new legal structures and ways of operating through large and complex restructuring programmes in 2017 and 2018. A number of banks are in the process of restructuring their businesses using the 'ring-fencing transfer scheme' (RFTS) restructuring tool. To use an RFTS, a bank must make an application to court. RFTS court directions hearings begin in 2017 and continue into 2018. Dates confirmed so far are available below:

PDFRing-fencing transfer schemes - dates for banks' court hearings

These changes will also affect some of the banks’ customers, counterparties and suppliers. For example, the sort codes of some customers will change.

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. Firms must comply with structural reform requirements as set out in each of the policy areas from 1 January 2019.

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

Further information on structural reform

Authorisations and approvals for structural reform

Regulatory reporting on structural reform

Read about structural reform in the PRA Annual Report and Accounts 2016/17, which also includes the Business Plan 2017/18.

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 10 August 2018
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