* New rules to be implemented from start of 2019
* Changes expected to cost up to $6.7 billion a year
* Six biggest banks plus TSB and Virgin Money to submitplans
By Matt Scuffham
LONDON, Jan 5 (Reuters) - Britain's biggest lenders haveonly a day before the deadline passes for submission of theirplans to protect ordinary customers from the banks' riskyactivities, starting a four-year industry overhaul that willcost billions of pounds.
The Bank of England is forcing the banks to set up aboundary around their branch operations to protect taxpayersfrom any repetition of the multibillion-pound bailouts requiredduring the financial crisis of 2007 to 2009.
Among the requirements will be new boards of directors forthe ring-fenced entities, new staff contracts and separatepension schemes. Banks will also need to separate theirrisk-management and IT operations.
The cost of running the separated operations with highercapital standards is likely to cost the industry between 1.7billion pounds ($2.6 billion) and 4.4 billion pounds a year,Britain's finance ministry has estimated.
Any bank with 25 billion pounds of UK deposits will need toset up a ring-fenced unit by 2019. At present, six lenders wouldneed to do so: HSBC, Lloyds Banking Group,Barclays, Royal Bank of Scotland, Santander UK and the Co-operative Bank.
Another batch have deposits of almost 25 billion pounds andcould be above that level by 2019. These include TSB andVirgin Money, both of which told Reuters on Monday thatthey will be submitting ring-fencing plans.
The plans must be submitted before Wednesday and the Bank ofEngland has indicated that it will be flexible in the waydifferent banks are handled under the new rules and will notadopt a "one size fits all" approach.
However, Andrew Tyrie, head of an influential parliamentarycommittee that scrutinises Britain's finance ministry, haswarned that banks could look to find ways around the ring-fenceand should face the threat of being broken up if they do.
Britain's biggest customer-facing banks -- Lloyds and RBS --hope to include as much as possible within the ring-fencedentity, whereas those with more risky investment activities,such as Barclays and HSBC, want fewer of their assets to be keptwithin the ring-fence, industry sources have said.
The regulator will publish final rules in the first half of2016, giving banks three years to prepare.
"It will then be a Herculean task to implement within eachbank the necessary requirements operationally," said TonyAnderson, a partner at law firm Pinsent Masons.($1 = 0.6572 pounds)
(Additional reporting by Steve Slater; Editing by DavidGoodman)