On 14 October 2024, the House of Commons published a written statement by Tulip Siddiq, Economic Secretary to HM Treasury, on the status of reforms to the bank ring-fencing regime. HM Treasury has announced the government's commitment to implementing a series of reforms to the banking regime.
HM Treasury's statement on the near-term bank ring-fencing reforms
On 14 October 2024, the House of Commons published a written statement by Tulip Siddiq, Economic Secretary to HM Treasury, on the status of reforms to the bank ring-fencing regime.
HM Treasury has announced the government's commitment to implementing a series of reforms to the banking regime, aiming for enactment as soon as Parliamentary schedules permit. These reforms, which were the subject of a consultation in September 2023, are designed to refine the operational framework for banking groups and ring-fenced banks (RFBs), as well as to alleviate regulatory burdens.
Key elements of the reform package include:
- The establishment of a secondary threshold that will exempt banking groups from the regime if their investment banking activities constitute less than 10% of their Tier 1 capital;
- Introduction of new flexibilities to enable RFBs to extend their operations globally, contingent on adherence to Prudential Regulation Authority (PRA) rules. This is expected to include the elimination of legislative restrictions on RFBs establishing branches and subsidiaries outside the European Economic Area (EEA);
- Initiatives aimed at boosting RFB investments in UK-based small and medium-sized enterprises (SMEs);
- Measures designed to streamline compliance processes and reduce the regulatory burden associated with the current regime; and
- An increase in the core deposit threshold for RFBs from £25 billion to £35 billion.
These proposed reforms are in response to the recommendations put forth by the Independent Panel on Ring-fencing and Proprietary Trading in its final report published in March 2022. They represent a strategic move to enhance the competitiveness and operational flexibility of the UK banking sector, while still maintaining robust regulatory oversight.
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