UK Banking Reform - Questions and Answers

Broadly, the term “ring-fencing” refers to a change in the way large banks are structured in the UK, a number of which have a presence locally. In the Isle of Man the groups affected are Barclays, HSBC, Lloyds, Santander and The Royal Bank of Scotland / NatWest.

The groups that are being required by the UK government to undergo this restructuring will be divided into:-

  • A ring-fenced bank or group, for their core UK retail services; and
  • A non ring-fenced bank or group, for all other customers or services not permitted to be within the ring-fenced bank / group.

In accordance with the new UK rules, a ring-fenced bank cannot have an operation (branch or subsidiary bank) outside the European Economic Area (EEA). Therefore, the Isle of Man operations (and customers of those operations) must be outside of the ring-fenced bank or group.

Ring-fencing has been brought about by changes in UK law following the global economic crisis that began in 2008.

The rules are scheduled to take effect from 1 January 2019, although all the banks affected are aiming to complete their restructuring ahead of this date.

The UK banks will implement ring fencing in different ways. Depending on the current legal structure, some banks will need to move customers into a different part of the group.  Some banks’ trading names may change.  It may be necessary to move customers to new sort codes or change their account numbers.  Operational services may be provided by a different firm within a group in future.  Customers may be issued with new debit and/or credit cards, and websites, mobile apps and online banking services may change. 

If a bank in the Isle of Man wishes to transfer accounts from one part of its business to another without the consent of every individual customer, it may use a legal process known as a Relevant Transfer Scheme (“RTS”). To use a RTS a bank must have the agreement of the Isle of Man High Court.  If your bank intends to use a RTS it will notify you and provide further information.  Similar schemes exist in the UK, specifically designed for Ring-fencing, called Ring-Fencing Transfer Schemes (“RFTS”).  You may also receive information from your bank about a RFTS.

If your bank has not already contacted you with information about how it is being affected by ring-fencing, you should expect to receive something in the coming months.  If you have any queries about how ring-fencing will impact you, you should contact your bank in the first instance.

You do not need to take any action unless you are contacted by your bank. Your bank will let you know what impact the changes will have on your accounts and services.  However, please remain alert to the possibility of fraud. Steps you can take to protect yourself include: 

  • Treat all letters, phone calls, emails and text messages with caution. Don’t assume they are genuine if they claim to be from your bank. It is best to check with your bank using the number on your card or bank statement;
  • Do not give out your account or card details or make changes to payments unless you are certain who you are dealing with;
  • A genuine bank or organisation will not contact you out of the blue to ask for your PIN, full password or to move money to another account. Never give out your personal or financial details unless it is necessary to use a service that you have requested and given your consent to, and where you trust the provider;
  • Don’t be rushed or pressured into making a decision or acting quickly. A genuine bank or other organisation won’t mind waiting if you want time to think.

Yes, there are no changes to these arrangements.

Each bank will be communicating with its own customers about ring-fencing and how it will affect them. If you have any further questions, please contact your bank.

Each banking group that is subject to ring-fencing has information on their websites.

The Bank of England provides a jargon-free explanation of ring fencing on its website, see http://edu.bankofengland.co.uk/knowledgebank/why-are-retail-banks-being-ring-fenced-and-how-will-this-affect-me/

The Prudential Regulation Authority is the lead regulator for ring-fencing and provides technical information on its website, see

http://www.bankofengland.co.uk/pra/Pages/supervision/structuralreform/default.aspx

The Financial Conduct Authority’s website provides information on the UK’s process, see https://www.fca.org.uk/consumers/ring-fencing