The Prudential Regulation Authority (PRA), the UK’s banking regulator, is planning to consult on changes to shared operational services rules for ring-fenced banks, a move aimed at reducing compliance costs and improving operational flexibility for the country’s largest lenders.
The proposed reforms would allow banking groups subject to the ring-fencing regime to share operational resources — such as data-processing, IT and back-office functions — more freely across ring-fenced and non-ring-fenced entities. The PRA intends to publish the formal consultation this summer.
Ring-fencing was introduced in 2019 as a post-financial crisis measure, requiring banks with more than £35bn in core deposits that also conduct material investment banking activity to separate their retail and investment banking operations. The separation was designed to shield customer deposits and preserve financial stability. The PRA argues that advances in its regulatory toolkit — most notably the maturation of the UK’s bank resolution regime — now allow for targeted relaxation of some of those requirements without compromising safety or resilience.
The changes form part of a broader package of ring-fencing reforms published alongside HM Treasury’s review, Safeguarding Stability, Enabling Growth: The Ring-Fencing Review. The Bank of England and the PRA worked closely with HM Treasury in developing the review. The announcement also sits within a wider series of regulatory adjustments intended to strengthen competitiveness and growth in the UK banking sector. These include the Financial Policy Committee’s recommendation to lower the capital requirements benchmark from 14% to 13%, the simplification of capital requirements for smaller firms through the Strong and Simple framework, a capital-neutral interpretation of Basel 3.1 for larger institutions, and raised thresholds for own funds and eligible liabilities requirements and Resolvability Assessment Framework reporting. The PRA says the shared services reform supports delivery of its secondary competitiveness and growth objective.
PRA executive director for prudential regulation David Bailey said, “The PRA’s forthcoming consultation on shared services is designed to make the ring-fencing rules more proportionate, reducing the compliance costs for Britain’s biggest banks. It will allow banks more flexibility in the way they support their customers whilst retaining important protections for consumers’ deposits.”
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