BoE says 'ring fencing' capital rules for retail banks need no big overhaul

LONDON, Jan 25 (Reuters) - The Bank of England said on Thursday that its rules requiring banks to "ring fence" their retail arms with bespoke buffers of capital have worked satisfactorily with no major overhaul needed.

Banks have lobbied for the rules, which Britain introduced after the global financial crisis of 2007-09, when taxpayers had to bail out several lenders, to be scrapped.

The finance ministry has already proposed that the threshold at which ring fencing applies to banks should increase from 25 billion pounds ($31.83 billion) of deposits to 35 billion pounds, part of an easing in regulation post-Brexit to keep London a globally competitive financial centre.

The BoE undertook its own review of the rules.

"The overall conclusion of this review is that most rules are performing satisfactorily," the BoE's Prudential Regulation Authority said in a statement, adding that it has identified some areas for improvement.

"The PRA intends to consult in due course on changes to its ring-fencing rules after a fuller exploration of the costs and benefits of the options identified."

The aim of the rules is to isolate retail deposits from any blow-ups in a bank's riskier activities, such as investment banking.

Areas for potential improvements include the rules relating to provision of services from ring fenced banks from non-ring fenced parts of the lender, the BoE said.

"Although there may be ways to improve the functioning of the rules, we do not consider that the fundamental approach should be revisited or that rules should be deleted."