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

Ring-fencing requires each of the larger UK banks to separate its retail banking activity from the rest of its business. This is to protect the retail banking activity 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 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 larger UK banks must implement ring-fencing by 1 January 2019.

Ring-fencing only affects the larger 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 larger 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

Some retail bank customers will be directly affected when the larger banks that fall under the ring-fencing legislation split into two separate legal entities. For example, your bank’s sort code may change and/or you may be issued with a new bank account number. 

Your bank will tell you if your account details are changing, when the change will take place, what to expect and if there is anything you need to do.

Most people will not be directly affected by ring-fencing but may be affected indirectly. For example, you may need to change instructions for some recurring payments if an organisation tells you their bank account details have changed.

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 larger UK banks may implement ring-fencing in different ways so, if you have accounts with more than one bank, you might get slightly different information from each of them and at different times. 

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

Protect yourself from fraud 

At a time when changes are happening in the banking industry, you should be especially wary of banking and online account scams

Steps you can take to protect yourself include: 

  • beware of calls out of the blue claiming to be from your bank – it is best to call the bank back using the number on your card or bank statement
  • remember a bank will not call or email you asking for your personal information, account details or the PIN for your bank or credit card

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.