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* BBA says current deadline may be 'extremely challenging'
* Banks want formal proposals no later than Q2 2015
* Rules to shield ordinary customers from riskier activities
* Millions of account sort codes may need to change - BBA
By Matt Scuffham and Steve Slater
LONDON, Jan 6 (Reuters) - Britain's banks have asked thefinancial regulator to speed up finalising new rules to protecttheir retail customers from riskier parts of their operations toenable them to meet a 2019 deadline.
The Bank of England (BoE) has ordered banks to "ring-fence"their branch activities to protect taxpayers from any futureexposure to the sort of multi-billion pound bailouts required torescue lenders during the 2007-09 financial crisis.
By dividing up a bank's activities, it would make it easierto wind up troubled sections without the risk of dragging downthe healthy parts of the business.
The BoE's Prudential Regulation Authority gave banks andother interested parties until Tuesday to respond to its initialproposals.
The British Bankers Association, a lobby group for theindustry, said in its response that it wants to speed up theconsultation.
"In order to deliver the reforms on time - banks, theregulatory authorities and a number of government agencies willneed to pull together to avoid any bottlenecks," said BBAExecutive Director Paul Chisnall.
"In particular we'd like the regulators to try to put inplace the new regime as quickly as possible to allow banks tomake final decisions about how to structure their businesses,"he added.
In a submission to the regulator seen by Reuters, the BBAsaid its members do not consider that the publication of formalproposals can wait until the third quarter of 2015 and wantsthem to be published no later than the second quarter.
It warned that the 2019 deadline is "tighter than meets theeye" and that banks looking to set up separate IT andoperational systems could find it extremely challenging to meetunless the current timetable is brought forward.
The BBA also said that there is a possibility that millionsof customers could have their account sort codes changed as aresult of the changes.
The PRA declined to comment.
Any bank with 25 billion pounds or more of UK deposits willneed to set up a ring-fenced unit. At present, six lenders wouldbe affected - HSBC, Lloyds Banking Group,Barclays, Royal Bank of Scotland, Santander UK and the Co-operative Bank.
Among the requirements will be new boards for thering-fenced entities, new staff contracts and separate pensionschemes. Banks will also need to separate their risk-managementand IT operations.
(Additional reporting by Huw Jones; Editing by MichaelUrquhart)
