09 October 2014
The Prudential Regulation Authority has published consultation papers in response to legislation on ring-fencing of core banking services.
Acting on recommendations from the Independent Commission on Banking, the Government introduced a requirement for banks with core deposits greater than £25 billion to ring-fence core services from activities associated with trading and financial interconnectedness by 1 January 2019. Any bank subject to these requirements must submit a plan of their expected legal and operating structures to the PRA by 31 December 2014.
The PRA is consulting on the legal structure of banking groups; governance; and continuity of services and facilities. In a statement, Andrew Bailey, Deputy Governor of the Bank of England and Chief Executive of the Prudential Regulation Authority said: ‘Improving the resilience and resolvability of firms has been at the heart of international and domestic reforms since the financial crisis. Ring-fencing will improve banks’ resilience, by protecting them from shocks, and facilitate orderly resolution – both of which are needed for a stable financial system.’
Peter Swabey, Policy & Research Director at ICSA commented: ‘It is a critical requirement that the proposed new ring-fenced bodies (RFBs) are “able to take decisions independently of other group members”, and so the governance arrangements for RFBs will necessarily be complex if they are to ensure that the management of the RFB is appropriately separated from the group and conflicts managed.’
The consultation will close on Tuesday 6 January 2015 and is available here: http://www.bankofengland.co.uk/pra/Pages/publications/cp/2014/cp1914.aspx