Featured Product

    James Proudman of PRA on Implementation of Ring-Fencing in UK

    June 16, 2017

    James Proudman, Executive Director for UK Deposit Takers Supervision of PRA, spoke at the British Bankers’ Association in London. He offered an overview of the implementation of ring-fencing to the industry and other relevant stakeholders. The implementation of ring-fencing is a “major step toward implementing the package of post-crisis reforms” in the UK, according to Mr. Proudman, and it will be implemented by January 01, 2019.

    To achieve this deadline, much work must be completed by the banks within a limited timeframe. While the timelines vary, all banks plan to meet this tight deadline, with the bulk of restructuring activities planned from now to mid-2018." He also discussed in detail the role and purpose of ring-fencing and highlighted that ring-fencing aims to improve the resilience of the largest UK banks to enhance financial stability, to maintain the provision of core UK banking services used by individuals and small businesses and to help protect taxpayers from any further bank bail-outs. Mr. Proudman said “ring-fencing addresses the problem that arises from universal banks that allow investment and international banking activities to be placed on the same balance sheet as the critical functions of lending, deposit-taking and payment services for retail and small corporate customers.” Acknowledging the risks involved in implementing ring-fencing, he assured that “the Bank of England is working with banks to ensure they have suitable contingency plans in place to meet ring-fencing requirements by 2019.” Achieving the intended outcomes of ring-fencing will be a continuous, daily process— not a one-off event, he added.

     

    For banks, this will require ensuring a clear line of sight of the ring-fence for both regulators and analysts to monitor, through regular reporting and disclosure obligations. The PRA is also considering how to supervise banks with ring-fenced structures and whether this will require changes to the current supervisory approach. The PRA will produce an annual report to Parliament publicly setting out the extent to which the banks have complied with the ring-fencing provisions. Where the PRA finds that a firm is not complying, it has new group restructuring or “electrification” powers, which enable the PRA to initiate a number of changes to a banking group subject to ring-fencing, if certain conditions are met. This is an important structural foundation provided by the legislation to set the right incentives for banks to comply. To conclude, he reinforced that ring-fencing will “contribute to a safer, more resilient and more resolvable banking system for the future—the completion of the ring-fence in 2019 will have been worthy of the building work taking place.”

     

    Related Link: Speech (PDF)

    Keywords: Europe, UK, PRA, Ring Fencing, Banking

    Related Articles
    News

    SEC Adopts Rules and Amendments Under Regulatory Regime for Swaps

    SEC announced that it took a significant step toward establishing the regulatory regime for security-based swap dealers (SBSDs) by adopting a package of rules and rule amendments under Title VII of the Dodd-Frank Act.

    September 19, 2019 WebPage Regulatory News
    News

    APRA Revises Standard on Margin Rules for Uncleared Derivatives

    APRA revised CPS 226, which is the prudential standard on margin and risk mitigation requirements for non-centrally cleared derivatives.

    September 19, 2019 WebPage Regulatory News
    News

    BIS Formalizes Agreement to Set Up Innovation Hub in Hong Kong SAR

    BIS and HKMA signed the Operational Agreement on the BIS Innovation Hub Center in Hong Kong Special Administrative Region (SAR).

    September 18, 2019 WebPage Regulatory News
    News

    PRA Proposal on Probability of Default and LGD Estimation

    PRA proposed, via the consultation paper CP21/19, an approach to implementing EBA’s recent regulatory products relating to Probability of Default (PD) estimation, Loss Given Default (LGD) estimation, and the treatment of defaulted exposures in the internal ratings-based (IRB) approach to credit risk.

    September 18, 2019 WebPage Regulatory News
    News

    PRA Issues Consultation on Prudent Person Principle Under Solvency II

    PRA, via the consultation paper CP22/19, has set out its proposed expectations for investment by firms, in accordance with the Prudent Person Principle (PPP).

    September 18, 2019 WebPage Regulatory News
    News

    CFTC Extends Comment Period for Proposals on Cross-Border Clearing

    CFTC announced that it is extending, until November 18, 2019, the comment period for the proposal for an alternative compliance framework for derivatives clearing organizations (DCOs) that are organized outside of U.S. and that do not pose substantial risk to the U.S. financial system.

    September 18, 2019 WebPage Regulatory News
    News

    BNM Publishes Financial Stability Review for the First Half of 2019

    BNM published Financial Stability Review for the first half of 2019.

    September 18, 2019 WebPage Regulatory News
    News

    APRA Observations from Thematic Review on Recovery Plans of Insurers

    APRA issued a letter to general insurers and life insurers, outlining observations from a recent thematic review on recovery planning by insurers.

    September 18, 2019 WebPage Regulatory News
    News

    FASB Issues Summary of Tentative Board Decisions at September Meeting

    FASB published a summary of the tentative decisions taken at its Board meeting in September 2019.

    September 18, 2019 WebPage Regulatory News
    News

    EIOPA Forms Consultative Expert Group on Digital Ethics in Insurance

    EIOPA established the Consultative Expert Group on Digital Ethics in Insurance to assist EIOPA in the development of digital responsibility principles in insurance.

    September 17, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3848