Everything you need to know about ring-fencing

Luke Skinner 27.02.2018

Time certainly flies – we’re already two months into 2018 and slowly but surely we are seeing more daylight with spring around the corner. It feels like only yesterday that the MiFID II deadline at the beginning of 2018 came into force – no doubt a relief for many working on and around it leading up to the new year. Post-implementation review across the industry is ongoing; the extent of remedial work remains to be determined and will become clearer over the coming months.

Other regulatory pieces remain at the forefront: GDPR is up next with the looming May deadline and SFTR is on the minds of many, particularly off the back of MiFID II and the increasing number of available, experienced regulatory / reporting candidates in the market. Brexit is the star of the show. It’s an overarching theme that affects the entire economy but is still shrouded in mystery.

Ring-fencing, on the other hand, has quietly trudged on. Perhaps not as glamorous as its more esteemed counterparts, but certainly no less important. 

What is ring-fencing?

Ring-fencing was borne out of the Financial Services (Banking Reform) Act 2013. To put it very simply, the aim is for the largest UK banks (c. £25bn+ ‘core deposits’ 3-year avg; individuals to SMEs) to separate their retail banking activity from the rest of its business (e.g. investment banking).

The reasoning behind this is to ensure greater financial stability moving forward, particularly off the back of the 2007-2008 financial crisis (10 years gone but the scars remain). The idea is to provide an insulator for retail / SME customers (e.g. current accounts, savings, payments) from other, riskier parts of the business (again, see: Investment Banking). Therefore, should other parts of the Bank fall into financial disarray, their Retail banking services should not be affected - broadly speaking. 

Hypothetically, the brunt cost of failure / bailout in the future should not fall on taxpayers (T&Cs apply...). Siloing should also aid drastically in reducing disruption to the general system and aiding in recovery.

Each bank will have their own challenges / methods in approaching this, but the deadline for all remains the same: 1st January 2019.

What to expect in 2018?

The banks are now on the final stretch of the track. Sanction hearings are due to take place from now up until the end of July, in which the court will decide whether the respective banks may proceed with their ring-fencing transfer schemes (RFTS). The ring-fencing structural reforms will then be implemented over the next few months.

Preparations have of course been underway for a while. It’s soon to be crunch time as banks enter the final stages. Candidates with Consumer / Commercial Banking experience across the general Projects & Change function (Project Managers / Business Analysts, Testers etc.), especially those who have previously worked on initial phases of ring-fencing reform, could potentially be in higher demand moving forward. 

If you would like to register your interest for Projects & Change opportunities, please contact the Strategy, Projects and Change team at Morgan McKinley by emailing your CV to spc@morganmckinley.com or alternatively call +44 (0)207 092 0297.

Luke Skinner's picture
Associate Director


Newly created Propositions Delivery focused, Product Opportunity - Leading Payments Brand
City of London21.02.2020
Newly created Propositions Delivery focused, Product Opportunity - Leading Payments Brand
City of London21.02.2020
Agile IT Programme Manager - Private Banking - London - £90-110k