News & Blog

Ring-Fencing

13th March 2018

Ring-fencing is the process of separating a banks retail banking activity from the rest of its business.

The theory behind this change, is that it will protect everyday customers, known as retail banking customers, from the banks ‘riskier business’, such as investment banking.  This is because ‘riskier business’ can be affected by the wider financial system.

Examples of retails banking are, current accounts, savings accounts and payments

The deadline for all large UK banks to implement Ring-fencing has been set for the 1st of January 2019.

Does this affect all bank account providers?

The answer is no… Ring-fencing legislation only applies to large UK Banks.  This means those with an average of more than £25bn on deposit.  So firstly, this rules out all Building Societies, mainly because they don’t get involved in ‘riskier business’.  Smaller banks are not affected by the new legislation either.

However, the new legislation might include more banks than you might think, because many banks are part of one larger group. eg Halifax are part of the Lloyds Banking Group and NatWest are part of the RBS Group.

The new legislation includes Barclays Group, RBS Group, Lloyds Banking Group, HSBC Group, and Santander UK.

How will this affect me?

Some banks will need to restructure their business using a legal process known as the ‘Ring-fencing Transfer Scheme’ or RFTS.  This allows a bank to transfer accounts from one part of its business to another without the consent of the customer. However, a bank must get an agreement by the court to be able to do this.

For the majority of banking customers there will be next to no change at all. However, you may see a change of your bank’s sort code, and in some cases a new bank account number.  If any changes made affect you or your account, you will be contacted by your bank to confirm this.


Source:

https://www.fca.org.uk/consumers/ring-fencing

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