Today the Government published the consultation document Banking reform: draft secondary legislation. The consultation sets out details of the ‘location’ of the proposed ring-fence, including the scope of the ring-fence, the de minimis exemption from ring-fencing, the prohibitions on ring-fenced banks, and the precise conditions for exemptions. The consultation will close on 9 October 2013.
The Banking Bill, which is currently going through Parliament and is excepted to come into force in 2014, will:
- introduce a ‘ring-fence’ around the deposits of people and small businesses, to separate the high street and protect taxpayers when things go wrong.
- ensure the Prudential Regulation Authority can hold banks to account for the way they separate their retail and investment activities, giving it powers to enforce the full separation of individual banks.
- give depositors, protected under the Financial Services Compensation Scheme, preference if a bank enters insolvency.
- give the Government power to ensure that banks are more able to absorb losses.