The U.K. Prudential Regulation Authority (PRA) has started consulting on proposed rules and policy changes concerning the setup and maintenance of third-country branches and subsidiaries within ring-fenced banking groups. The consultation stems from HM Treasury’s Smarter Ring-Fencing Regime consultation, part of which involves proposing the lifting of the ban on Ring-Fenced Banks (RFBs) that prohibits them from conducting operations or delivering services to customers outside the U.K. and European Economic Area. Details on these developments can be viewed here.
RFBs are banks legally obligated to separate their core retail banking from their more speculative investment operations. This ring-fencing aims to protect the ordinary depositors and everyday banking services from risks connected to the bank’s other activities. Currently, UK regulations prevent these RFBs from conducting business outside the UK and EEA – a limitation that’s proposed to be removed.
The PRA aims to ensure a balanced approach between the benefits of the liberalization of RFB operations and the underlying protection these measures offer. As part of the consultation process, responses from interested parties are being taken into account for further discussions.