Ring-fencing retail banks: no turning back 

Implications for firms

• The direction of travel towards the ring-fencing of retail banks is now clear. Firms should begin to prepare for this, as the level of complexity and change will be significant.
• Firms will have to draw up plans for the ring-fencing of their retail banking operations much sooner than the Government’s implementation deadline of 2019. These plans will need to be included within the initial recovery and resolution plans (RRPs) that firms will be required to submit to the FSA by June 2012.   
• The Government supports the potential use of "bail-in" debt to protect retail depositors and tax-payers, but both the amounts and the types of debt that would be available for bailing-in remain to be determined.      
• The Government’s response leaves open many points of detail, and the legislation to implement the reforms will be technically very challenging. Some of these points are being consulted on within the Government’s response document, and some will be left to the Prudential Regulation Authority (PRA). 
• Firms should not expect a significant amount of concessions from the consultation process, and in practice the combination of legislation and PRA rule-making may not leave firms with much flexibility.   
• On competition, firms will have to implement measures to enable customers to switch current accounts more easily, and to enhance the transparency of the interest foregone on credit balances.   
• The Government has indicated that it will extend some of the implementation rules - as well as those relating to RRPs and resolution - to large investment firms and holding companies, in line with expected EU proposals on resolution planning.  
• The question of how branches, and specifically EEA branches given the Single Market, will be treated needs to be clarified.  While the number that take retail deposits is limited, there are sufficient numbers that this issue does need to be addressed as part of the consultation process.

Please follow the link below to read more on the ICB final recommendations:

Independent Commission on Banking Final Recommendations