HM Treasury publishes ringfencing Review

In 2020, the Treasury appointed an independent panel to:

1. review the operation of the legislation related to ring-fencing; and
2. review banks’ proprietary trading activities following a statutory report from the PRA published in September 2020.

The Panel concluded that the ring-fencing regime is worth retaining at present but needs to be more adaptable.

Specifically, the Panel recommended that:

1. the deposit threshold is preserved at £25 billion;
2. a new power be granted to the authorities to remove banks from the regime that are judged to be resolvable;
3. banks who undertake minimal investment banking activities are removed from the regime;
4. banks in the regime can undertake a small amount of excluded activities;
5. banks in the regime can provide customers outside of the EEA and SME with banking services; and
6. some technical changes are made to improve the operation of the regime.

These recommendations aim to provide more flexibility to the authorities and banks, to enable them to adapt to customer needs using a forward looking and judgment based approach.

The Panel acknowledged that the UK does not operate a zero-failure regime meaning that it is accepted that banks in the UK could fail in the future.

The Treasury will establish a taskforce with the Bank of England with immediate effect to assess the Panel’s recommendations and options for taking them forward. The Treasury will publish a government response later this year.