Michael LewisHM Treasury has published a policy paper with the formalised plans for the reform of the ring-fencing regime, which was heralded in the Mansion House speech in 2025.
The changes will not revoke the regime in its entirety, but will:
- set it within a more agile framework, based mainly on secondary legislation and PRA rules, and ensuring the PRA can align it with the resolution regime as that changes;
- allow relevant banks to provide more products and services by introducing a “New Growth Allowance”, and allowing ring fenced banks to offer more risk management products, participate in publicly backed guarantee schemes and take exposures to a wider range of financial institutions than is currently permitted;
- address inefficiencies in how the current regime applies to banking groups;
- potentially allow firms more flexibility in sharing resources and services across the ring fence; and
- embed proportionality by allowing a 3 yearly review of thresholds and ensuring reporting requirements are also proportionate.
The upcoming Financial Services and Markets Bill will set the framework to enable the Government then to make the necessary changes through secondary legislation. All of this will be done as soon as Parliamentary time allows. There will be a consultation in Summer 2026 on some of these aspects.