Barclays applies for new licence to meet UK ring-fence rules

LONDON, July 29 (Reuters) - Barclays has appliedfor a new UK banking licence to comply with new rules requiringit to separate its domestic retail banking arm, highlighting thebigger task it faces in restructuring than its rivals.

Britain's big lenders must set up so-called ring-fencedbanks for their UK retail and small business customers, so theyare kept separate from riskier investment banking activities.The aim is to provide greater protection to depositors andtaxpayers.

Barclays has faced more of a challenge than rivals inpreparing for the new rules, which much be in place by 2019,industry sources have previously told Reuters.

It is likely to be the only major bank that needs a newlicence, as all its UK businesses are bundled into one bank -Barclays Bank Plc. Rivals such as Royal Bank of Scotland and HSBC already have more than one UK licence orseparate licences for UK units.

"We have a much more complicated situation because we don'thave a ready-made bank already functioning ... We need to createanother bank and we've asked for another licence for that tohappen," Barclays Chairman John McFarlane said on Wednesday.

Britain has speeded up the process for applying for new banklicences to six months or less, so Barclays' application shouldbe largely administrative.

It has also faced more challenges on how to restructure,sources said. The decision is crucial for how banks will look inthe future and how they deal with customers.

Barclays is expected to choose a 'narrow' ring-fenced bank,meaning it will put relatively few customers and activitiesinside the new unit, the industry sources said. That is incontrast to most other banks, which intend to put more customersand activities into a 'broad' ring-fenced business, the sourcesadded.

Barclays declined to provide more details on the likelyshape and size of its ring-fenced bank on Wednesday.

"The big issue we are trying to wrestle with is once wecreate two banks, each of those banks has to be standalonestrong, therefore what we put in each of the banks needs to becarefully thought out," McFarlane told reporters after the bankreported a 12-percent rise in profits. (Reporting by Steve Slater; Editing by Pravin Char)