On March 2, 2023, HM Treasury issued a Call for Evidence requesting views on the practicalities of aligning the ring-fencing and resolution regimes for banks. The potential to align the U.K. ring-fencing and resolution regimes was announced on December 9, 2022 as part of the Edinburgh Reforms, in response to the recommendations of Independent Review on Ring-fencing and Proprietary Trading, published in March 2022. We discussed the Edinburgh Reforms in our client note: "UK Government Publishes Edinburgh Reforms for Financial Services". Responses to the Call for Evidence may be submitted until May 7, 2023.
In the Call for Evidence, the government is seeking views on:
In response to the Independent Review on Ring-fencing and Proprietary Trading, the government has confirmed that it will consult in mid-2023 on the recommendations made by the Review (other than the recommendation to align the ring-fencing and resolution regimes). These reforms include:
In addition, the Government is also proposing to raise the threshold for banks to be within scope of the regime from £25 billion to £35 billion in retail deposits. This latter amendment was not proposed by the Independent Review, which instead suggested that banks with retail deposits in excess of £25 billion should be exempt from ring-fencing where they conducted excluded activities up to a certain level.
A Financial Markets Law Committee paper published in November 2021, to which Shearman & Sterling contributed, set out a series of very detailed potential reforms to make the ring-fencing regime more effective and eliminate uncertainties and difficulties with the regime. The current proposals do not yet extend to addressing this level of detail, however, these could be addressed in the consultation expected in mid-2023.
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