HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks. This follows an independent ring-fencing regime review, which concluded that the resolution regime offers a more comprehensive solution to addressing the problems of "too big to fail" and recommended that the government should consider these practicalities.
This Call for Evidence represents the first stage of the government response to this recommendation. It seeks views on the ongoing benefits that ring-fencing provides to financial stability not found elsewhere in the regulatory framework and on the steps that could be taken to better align the ring-fencing and resolution regimes without losing financial stability benefits. The Call for Evidence invites respondents to consider a wide range of options for the longer-term future of ring-fencing. The government is proposing to use the below criteria and welcomes views of stakeholders on their appropriateness:
- Impact on financial stability. On criteria revolves around assessment of the impact on the ability of the Bank of England, Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) to promote their objectives, including to ensure the continuity of critical economic functions. This would include the clarity of supervisors’ understanding of firms’ operations and thus their ability to identify and manage risks to financial stability at an early stage as well as the likelihood of public funds being required to be deployed in support of a failed bank.
- Impact on firms. The next criteria entails examination of the costs each option impose on, or alleviate for, firms. Would firms be likely to materially change existing organizational structures? Would some options provide more or less regulatory certainty? It should be noted that the use of existing regulatory powers to replicate identified material benefits of ring-fencing may impose new and significant costs on firms and would need to be carefully considered. The government intends to draw on responses to Q3 in considering this impact.
- Impact on UK competitiveness and growth. Another criteria involves understanding the effect of each option on the attractiveness of the UK relative to other jurisdictions as a financial services hub and the ability of firms to support economic growth in the UK.
- Impact on competition. The extent to which each option diminishes or strengthens the ability of individual firms to compete with each other in the interest of UK consumers should also be considered.
Once this Call for Evidence has closed, the government, working with BoE and PRA through the Ring-Fencing Taskforce, will undertake detailed analysis of the received responses. This analysis will serve to inform the development of an initial policy position regarding the long-term future of the ring-fencing regime. The government will then issue its response to the Call for Evidence and set out next steps.
Related Link: Consultation on Aligning Ring-Fencing and Resolution Regimes
Keywords: Europe, UK, Banking, Resolution Framework, Ring-Fencing, Basel, Too Big to Fail, PRA, HM Treasury
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
German Regulators Issue Multiple Reporting Updates for BanksRelated Articles
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks
At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.
ISSB Standards Shine Spotlight on Comparability of ESG Disclosures
The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures
EBA Issues Several Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
BCBS Proposes to Revise Core Principles for Banking Supervision
The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.
US Proposes Final Basel Rules, Transition Period to Start in July 2025
The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.
FSB Report Outlines Next Steps for Climate Risk Roadmap
The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.
EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise
The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.