Deloitte comments on “electrification” of the banking ring-fence
4 February 2013
As the Government introduces the Banking Reform Bill to Parliament, Clifford Smout, co-head of the Deloitte Centre for Regulatory Strategy, said:
“The Government has today accepted a key recommendation of the Parliamentary Commission on Banking Standards to “electrify” the retail ring-fence. The new rules provide the regulator with the power to impose full separation of banking activities in individual banks if they attempt to undermine the ring-fence. Any banking group found to be breaching the ring-fencing rules would be forbidden from having a retail banking arm, effectively ending its ability to operate as a universal bank.
“These proposals reflect the view that supervisors need to be able to act when regulations are breached, and that the Government believes that this is a proportionate remedy in such a case.
“How the regulator will monitor compliance and respond to any attempt to breach the ring-fence will be important, as will the role of Government, who have the final say on whether to force a break-up in any individual case. Today’s publication leaves these crucial details for further legislation. Investors will understandably seek further clarity on the circumstances in which a bank may be forced to separate completely. As always, the devil is in the detail.”
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