FCA & PRA Publish Ring-fencing Guidance

September 18th, 2015

The United Kingdom’s (UK) Financial Conduct Authority (FCA) published guidance on the implementation of ring-fencing requirements today.  The Prudential Regulatory Authority (PRA), who shares responsibility for the provisions set forth in the Financial Services and Markets Act and the Financial Services (Banking Reform) Act, also published a consultation paper today.  The legislation requires the two agencies to promulgate and implement regulations to “ring-fence” vital banking services from riskier ones that are currently housed under one financial institution.

 

The PRA guidance lays out the proposed process and reporting requirements for financial institutions to get ring-fencing transfer schemes (RFTS) approved.  The FCA published more general guidance on the agency’s suggested approach for ring-fence implementation.  The FCA guidance states that the agency will examine the impact of ring-fencing on consumers in its supervisory capacity, saying that “The FCA expects that firms’ implementation plans are drawn up and implemented with due regard to the interest of consumers.”  The FCA also outlines its expectations that financial institutions will communicate the impact of ring-fencing to consumers.  The authorization considerations for dual-regulated and solo-regulated entities are included as well.  Both agencies are soliciting feedback on the guidance. Comments are due by October 30, 2015.

 

Resources:

FCA Guidance Consultation:

FCA Press Release:

PRA Press Release:

PRA Consultation Paper: