Ring-Fencing the Universal Banks (Financial Economics)

Universal banks have both a core commercial banking arm and also an investment banking arm. Ring-fencing is an important approach to financial regulation.

• The 2013 Banking Reform Act requires UK banks to separate - or ring-fence their core banking services from investment and international activities by 1st January 2019
• Core banking services are lending, deposit-taking and payment services for retail and small corporate customers
• Building societies are not in the scope of the legislation, nor are banks with less than £25bn of retail deposits
• 75% of customer banking deposits will be protected as a result of the new ring-fencing from 2019
• Main aim: Protect the savings deposits of people and small businesses from external shocks to the banking system