UPDATE 1-HSBC faces $2.4 billion bill for new ringfencing rules

* Lloyds says bill will be 'hundreds of millions'

* HSBC says ongoing costs won't be substantial

* ICB head Vickers says reforms still necessary

* Rules meant to stop need for bank bailouts (Recasts, adds comments from HSBC, Lloyds executives)

By Matt Scuffham

LONDON, June 30 (Reuters) - HSBC will face a billof around 1.5 billion pounds ($2.4 billion) to shield itsdomestic retail customers from riskier parts of its operations,the chairman of its UK business told lawmakers on Tuesday.

The Bank of England has told banks they must set up aboundary around their branch operations to protect taxpayersfrom any repetition of the multi billion-pound bailouts requiredduring the financial crisis of 2007 to 2009.

Among the requirements will be new boards of directors forthe ring-fenced entities, new staff contracts and separatepension schemes. Banks will also need to separate theirrisk-management and IT operations.

HSBC has said it will base its "ring-fenced" British retailand commercial banking business in Birmingham in centralEngland, shifting about 1,000 staff there from its Londonheadquarters.

"Our current estimates are around 1.5 billion pounds,"Jonathan Symonds, the chairman of HSBC's UK bank told the Houseof Lords Economic Affairs Committee.

"I think the ongoing costs won't be substantial other thanthe move to Birmingham but I think the one-off implementationcosts are pretty substantial," Symonds said.

Lloyds Banking Group's Finance Director GeorgeCulmer said it would cost his bank "several hundred million"pounds to set up the ring-fenced bank with annual ongoing costsin the "tens of millions of pounds".

Lloyds, Britain's biggest retail bank, has less work to doas 97 percent of its operations will sit within the ring-fence.HSBC, which has much larger international and investment bankingoperations, will only have 30 to 40 percent of its businesswithin the ring-fenced operation.

Some senior bankers believe other regulatory changes andstructural reforms already underway within banks have made theneed for ring-fencing redundant.

Former Barclays Chairman David Walker has said newcapital and liquidity requirements introduced since the ICB'sreport and new European rules on the recovery and resolution offailing banks had eliminated the need for ringfencing.

However, John Vickers, who headed the Independent Commisionon Banking (ICB) which recommended the new ringfencing rules in2011, told the committee they were still necessary.

"In my view the case for those measures is every bit asstrong as when we made our report four years ago, arguablystronger still," he said.

The ICB was tasked with making proposals to reform theindustry after Britain bailed out Royal Bank of Scotland and Lloyds Banking Group at a combined cost of 66billion pounds during the crisis.

Bank of England Governor Mark Carney has said that newrules, including ringfencing, will enable large, globallyimportant, banks to be wound down if they fail without the needfor taxpayer-funded bailouts.

($1 = 0.6363 pounds) (Editing by Sinead Cruise and William Hardy)