Commercial Banks

Treasury written question – answered on 19th November 2018.

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Photo of Ruth Cadbury Ruth Cadbury Labour, Brentford and Isleworth

To ask the Chancellor of the Exchequer, what assessment he has made of the progress of UK banks in ring-fencing retail services from investment banking.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

Under the 2012 Financial Services (Banking Reform) Act large UK banks with retail deposits totalling more than £25 billion are required to ring-fence the deposits of individuals and small businesses from other activities within their groups, such as investment and international banking.

All banks within scope of the ring-fencing regime have successfully completed the necessary restructuring of their operations in advance of the regime coming into force in January 2019. This includes moving customers from one part of the bank to another, changing over a million sort codes and the joining of both UK and international payment systems to facilitate operational separation. The banks have also completed large technology migrations as part of the changes to their internal processes

By insulating these core banking services in a separate legal entity, ring-fencing will support continuity of provision of vital services to the economy if there are shocks originating elsewhere in the group and the global financial system. It will also make banks that provide these essential services simpler and more resolvable and therefore prevent the costs of failing banks falling on taxpayers.

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