Find out more about ring-fencing and how retail bank customers will be affected.

The Ring-fencing legislation requires each large UK bank to separate its retail banking activity from the rest of its business. This is to protect customers and the day-to-day banking services they rely on from unrelated risks elsewhere in the banking group and shocks affecting the wider financial system. 

It reduces the likelihood that essential banking services used by ordinary depositors, like current accounts, savings accounts and payments, are put at risk by a failure in another part of the business, such as investment banking.

Ring-fencing was one of several important reforms brought in by the government to strengthen the financial system following the financial crisis that began in 2007.

The large UK banks must implement ring-fencing by 1 January 2019. They started making changes in 2017 and will continue to do so during 2018 in order to meet this deadline.

Ring-fencing only affects the large UK banks

Ring-fencing legislation applies only to UK banks with a 3-year average of more than £25bn ‘core deposits’ (broadly from individuals and small to medium-sized businesses). 

It is these large banks that must ‘ring-fence’ or legally separate their essential banking services from the rest of their banking group.

Essential banking services are the core services that retail banks offer and include:

  • accepting deposits or other payments into an account
  • offering facilities for withdrawing money or making payments from an account
  • overdraft facilities

How retail bank customers will be affected

You do not need to take any action unless you are contacted by your bank. If you are affected by the changes, your bank will tell you how, when the changes take place and whether you need to do anything.

Some retail bank customers will be directly affected when some of the banks that fall under the ring-fencing legislation change the way they are structured. For example, your bank’s sort code may change and/or you may be issued with a new bank account number. 

The banks expect payments sent to old account numbers and using old sort codes will be automatically redirected to their intended destination, for a significant period of time. 

Direct debits and many standing orders will be updated by the banks on the customer’s behalf.

The large UK banks may implement ring-fencing in different ways so customers of different banks may be affected in different ways. If you have accounts with more than one bank, you might get slightly different information from each of them and at different times. Even similar customers of the same bank may be affected in different ways.

If you have several accounts with one bank, it may contact you about ring-fencing more than once.

Ring-fencing Transfer Schemes

Some banks need to use a legal process to restructure their business. This legal process is called a Ring-fencing Transfer Scheme or RFTS. The RFTS allows a bank to transfer accounts from one part of its business to another without the consent of every individual customer. To use an RFTS, a bank must have the agreement of the court. 

As part of the legal process, the bank attends a court directions hearing. The purpose of this hearing is for the court to consider the bank’s planned communications about the RFTS, including those to its customers. These hearings began in 2017 and will continue during 2018. Some banks also had a pre-application directions hearing to discuss certain details with the court before the directions hearing.

If you think you would be adversely affected by your bank’s RFTS, you have the right to object to the RFTS and have your objection heard by the court. To help the court understand the point(s) you wish to make, you need to file a written statement with the court. Banks have provided information on their websites about how and when to do this, and whether they require a copy of your statement. You must also provide a copy of your statement to the Prudential Regulation Authority (PRA). For information about how to do this, see Written statements to the PRA on RFTS.

During 2018, each bank will attend a sanction hearing. At the sanction hearing, the court decides whether the bank may go ahead with its RFTS. If the court agrees the RFTS can go ahead, this is the end of the court process. The bank’s actual transfer date follows sometime after that.

Dates confirmed so far for RFTS court hearings are:

RFTS court hearings Barclays Group RBS Group (1st RFTS) Lloyds Banking Group HSBC Group Santander UK RBS Group (2nd RFTS)
Pre-application directions hearing 31 July 17 - 25 Sept. 17 - 27 Oct. 17  -
Court directions hearing 10 Nov. 17 21 Nov. 17 4 Dec. 17 22 Jan. 18 5 Feb. 18 15 May 18
Sanction hearing 27 Feb. 18 22 March 18 (tbc) 27 March 18 21 & 23 May 18 11 June 18 31 July 18
Case reference number (CRN) FS-2017-000002 P1163 / 17 FS-2017-000004 FS-2018-000001 FS-2018-000003 To be confirmed

This table will be updated if further dates are confirmed or if dates change.

Barclays, Lloyds Banking Group, HSBC and Santander UK are making RFTS applications to the High Court of England and Wales. RBS Group is making RFTS applications to the Court of Session in Scotland. 

Protect yourself from fraud 

At a time when changes are happening in the banking industry, all bank customers should remain alert to the possibility of banking and online account scams

Steps you can take to protect yourself include: 

  • Treat all letters, phone calls, emails and text messages with caution. Don’t assume they are genuine if they claim to be from your bank. It is best to check with your bank using the number on your card or bank statement.
  • Do not give out your account or card details or make changes to payments unless you are certain who you are dealing with.
  • A genuine bank or organisation will not contact you out of the blue to ask for your PIN, full password or to move money to another account. Never give out your personal or financial details unless it is necessary to use a service that you have requested and given your consent to, and where you trust the provider.
  • Don’t be rushed or pressured into making a decision or acting quickly. A genuine bank or other organisation won’t mind waiting if you want time to think.

Find out more ways to protect yourself from banking and online account scams.

Regulation of ring-fencing

The Prudential Regulation Authority (PRA) is the lead regulator for ring-fencing. It is responsible for identifying which banks are within the scope of the ring-fencing legislation and for supervising banks’ implementation of the prudential rules. 

We are working with the PRA, the Bank of England, the Treasury and the larger UK banks to support the banks’ implementation of ring-fencing efficiently and on time. 

Further information

If you have any questions about ring-fencing or concerns about any communication you have received about it, you should contact your bank.

The Bank of England has a jargon-free explanation of ring-fencing. The Prudential Regulation Authority also has technical information about ring-fencing, which it calls ‘bank structural reform’.

HM Treasury has more on the legal background to ring-fencing.