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* Banks must submit 'ring-fence' plans by Jan 6
* Depositor protection increased to 1 mln stg for temporarysavings
* Deposits must move in 24 hrs to another bank if one fails
* No detail yet on what capital separate UK unit must hold (Adds more detail on costs, implementation)
By Huw Jones and Steve Slater
LONDON, Oct 6 (Reuters) - Britain has given its banks threemonths to show how they plan to protect their retail customersfrom riskier parts of their operations.
The Bank of England is forcing lenders to set up a boundaryaround their high street operations in an effort to protecttaxpayers from any repetition of the multi-billion poundbailouts of investment banking operations that occurred duringthe financial crisis.
The changes, which will come into effect by 2019, mean thatbanks must submit preliminary plans by Jan. 6, 2015, the Bank ofEngland said on Monday.
But it did not clarify a point that banks have been worryingabout - whether they need to hold more capital in thering-fenced domestic bank, or whether leverage ratios will bedifferent. Those details will come later, it said.
The BoE, whose Prudential Regulation Authority arm regulatesbanks and insurers, also published consultation papers for othersafeguards that are stricter than European Union rules in somecases.
It is also proposing that if a bank goes bust, its accountsshould be transferred to another lender within a day so thatcustomers can continue to withdraw their money and use theircards without interruption instead of having to wait forcompensation. The change is expected sometime in 2016.
The aim is to prevent a repeat of the chaos seen whenNorthern Rock hit trouble in 2007 at the start of a globalfinancial crisis, triggering the first run on a British bank inover a century as customers queued to withdraw their money.
The BoE's proposals move towards the U.S. model for speedyresolutions of troubled banks, and go further than EuropeanUnion rules that give customers an automatic right to have alltheir money up to 85,000 pounds refunded within seven workingdays from January 2024.
The BoE also said it would protect depositors for up to 1million pounds if they temporarily have higher savings, such asif they have extra cash while they are moving house or getcompensation for a personal injury. Savers would be covered forthe extra cash for six months.
And it said holders of insurance policies for annuities,protection against accidental death or injury, and incapacityand professional indemnity should receive 100 percentcompensation from July 2015, up from 90 percent now.
This follows the case of Equitable Life, an insurer thatnearly went bust over a decade ago but has taken years toresolve compensation payouts. The Association of BritishInsurers had no comment.
DECISION TIME
Britain's government wants retail banking operationsseparated so they can survive any problems in another part of abank, and allow any bank that hits trouble to be dismantled moreeasily. Other countries, including the United States andSingapore, are also attempting to better shield domestic units.
Britain's lenders have been working on restructuring sincethe plans were set out three years ago. But they say they needmore clarity from the regulator on what is to be included in theunits they are to ring-fence, particularly how some serviceslike derivatives and hedging products are to be provided tocompanies.
"Given that several of the major banks have been engaged inplanning for the ring-fence for some time now, in broad termsthis should be achievable, but the banks will have to make thetransition from exploring options to making decisions," saidClifford Smout, a partner at consultancy Deloitte.
"Given the potential scale of change required byring-fencing, plans cannot be 'preliminary' for too muchlonger."
Banks will need to detail the legal and operating structureof their planned ring-fenced banks, including balance sheets andprofit and loss statements.
The BoE also said no more than a third of the protectedbank's board can be current employees or directors of any otherpart of the group, and the chairman and chief executive of theunit may not be an executive of the separate investment bankingoperations.
Pay policy at the ring-fenced banks should be consistentwith sound risk-management and long-term interests of thedomestic retail bank, and distinct from the group as a whole.
Banks face a multi-billion pound bill to set up the UK unitsand the cost of running them with higher capital standards andseparate operations may cost the industry between 1.7 billionand 4.4 billion pounds a year, the UK Treasury has estimated.
The BoE estimated there will be a one-off cost of up to 390million pounds for the industry to implement the new safeguardson accounts, with a total annual cost of up to 50 million. (Additional reporting by Matt Scuffham; Editing by SophieWalker and Anna Willard)
