It has been three years since the Independent Commission on Banking (the “IBC”), chaired by Sir John Vickers, published its final report and recommendations on the reform of the UK banking system in response to lessons learnt during the financial crisis (the “Report”). As part of the Report’s suggested package of solutions, it was proposed that UK banking stability required structural reform in order to ring-fence (from risks present elsewhere in the financial system) banking services that are integral to the provision of payments services to customers in the European Economic Area (EEA). Since publication of the Report, the UK Government has implemented many of its recommendations through the Financial Services (Banking Reform) Act 2013 (the “Banking Reform Act”), which came into force in December 2013. Amongst other things, the Banking Reform Act (primarily through amendments to the Financial Services and Markets Act 2000 (“FSMA”)) lays the foundations for the ring-fencing requirement, defining the ‘core activities’ which should be quarantined within the ring-fence (a “Ring-Fenced Body” or “RFB”) and restricting RFBs from performing certain ‘excluded activities’.

On 6 October 2014, the Prudential Regulation Authority (“PRA”) published proposed rules and sought feedback in respect of a package of measures designed to promote resilience and resolvability in the UK banking sector. The PRA’s publications include consultation paper CP19/14 (the “Consultation”) on the implementation of ring-fencing, which provides a draft supervisory statement covering legal structure, governance and the continuity of services and facilities. This update aims to highlight some of the PRA proposals, as well as confirm that all affected firms are expected to submit preliminary plans detailing their anticipated legal and operational structures by 6 January 2015.