LONDON (Alliance News) - The Bank of England on Thursday said that the largest six UK banks may need to bolster their capital levels under incoming ring-fencing rules that require the separation of retail operations from investment banking activities.
The ring-fencing rules could mean that banks with more than GBP25 billion in core deposits - money held for from individuals and small businesses - could be faced with additional capital requirements of up to GBP3.3 billion in total, the Bank of England's Prudential Regulation Authority said.
The ring-fencing rules, which are due to come into force in 2019, are designed to make sure that functions critical to the economy, such as the deposit-taking and payments activities of retail banks, can continue in the event of the failure of other units of a banking group or broader stress in the financial system.
Barclays PLC, HSBC Holdings PLC, Lloyds Banking Group PLC, and Royal Bank of Scotland Group PLC are the London-listed banking groups likely to be affected by the rules.
The proposals made within the PRA's consultation paper require ring-fenced banks to have enough capital as standalone units, a decision driven by a desire to shelter them from risks in other parts of a banking group.
The PRA plans on monitoring dividend distributions from a ring-fenced entity to its broader group, and wants such entities to provide it with information that supports the ring-fenced entity's ability to maintain sufficient capital levels once a payment is made.
"Making our firms more resilient has been at the forefront of our post-crisis reform agenda. Today represents an important step forward in achieving this aim. We have provided clarity for affected banks on how we will implement ring-fencing and this will enable firms to take substantial steps forward in their preparations for structural reform,"
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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Barclays (BARC)
Lloyds (LLOY)
HSBC Holdings (HSBA)
