• A  A  A  A  

Bank Ring-Fencing

by Insignis Cash Solutions in Industry Perspective

Back in 2011, Sir John Vickers set out the initial proposal for bank ring-fencing. Its aim is to separate the services that small and medium-sized banks provide from their more high-risk investment trading operations. This therefore protects the high-street customer if the investment banking and trading operations of those banks sustain big losses and place the viability of the bank in question.

As simple as this may sound, only now, many years later, are the banks and regulators defining what this will look like. They are starting to implement the “separation” of the ring-fenced entity in each institution. Innumerable hours of analysis into which client resides in which entity is finally prompting banks to classify their customers into these two groups.

While your classification may remain unchanged, this potential change in counterparty risk highlights some key aspects that may affect your business. There are several questions you should be discussing with your bank now, before the deadline. You will then have time to adjust your banking strategy accordingly.

Which entity will my Business/Charity be in – the ring-fenced on non ring-fenced part of the bank?

This is essential to understand if there are further implications on your business from a counterparty risk, operational, tax, or legal perspective.

Has the credit rating of the entity changed because of ring-fencing?

Banks need to apply capital to each entity separately. How this is done and how much is applied to each entity may mean that your bank has a change in credit rating. This may, in turn, affect any internal parameters you may have regarding your banking counter parties.
Will the details of my existing account with my bank change?

It is possible, even though you remain with the same bank by name, the details of your existing sort code or even account number may need to change. For a Charity or Business, who has provided these details to hundreds or even thousands of clients or donors to make payments, this could mean significant disruption and preparation time.

The deadline is 1st January 2019 but the implementation is complex and slow. I urge you to contact your provider to determine what their steps are. This will ensure the process is as smooth as possible and has as little impact on your business as possible.

We believe this process should be a catalyst for re-examining clients banking relationships more generally. The industry continues to experience unprecedented change and many historical assumptions may now be obsolete.

If you would like more information on any of the points raised in this article, then please get in touch with me via info@insignisam.com.

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>


  • A  A  A  A  

Press Contacts

Sally Maclachlan
01223 200 674


Level39's Twitter avatar

Why banks and FinTech startups need each other more than ever t.co/P7aYZ8UiJI via @uktnofficial

Retweeted by Insignis Cash
Insignis Cash's Twitter avatar
Insignis Cash

Great news. Stop the rot to your savings even more by making the most of your interest earning potential and compou… t.co/YnIOxxjB7D

Insignis Cash's Twitter avatar
Insignis Cash

Great ideas. Don't forget to also get the best rate for your business cash. We can help you manege this so that you… t.co/AsNAUfgFEL

Insignis Cash's Twitter avatar
Insignis Cash

Open Banking: why the High Net Worth will benefit from an Open Mind t.co/J5kbXLbJr8

Insignis Cash's Twitter avatar
Insignis Cash

Tandem gets banking licence after closing Harrods Bank acquisition t.co/yrQaxQAQTJ via @Finextra

As Featured In: