United Kingdom's HM Treasury has published the conclusions of its review of the bank ring-fencing regime, keeping the structural separation of retail and investment banking but proposing a broader reform package to make the framework more agile, proportionate and aligned with prudential and resolution rules. The package will be taken forward through the upcoming Financial Services and Markets Bill and a summer 2026 consultation on further changes, including a New Growth Allowance to let ring-fenced banks provide more financing and services to businesses. Secondary legislation changes would follow once the bill is enacted and Parliamentary time allows. Planned primary legislation would let the Prudential Regulation Authority remove duplicative ring-fencing rules where other prudential or resolution requirements already meet the regime’s objectives, reduce prescriptive statutory rulemaking requirements, update the framework to reflect the modern resolution regime, and move more detailed excluded activities and prohibitions into Prudential Regulation Authority rules. The summer consultation will cover an allowance of up to 10% of a ring-fenced bank’s Pillar 1 risk-weighted assets for credit risk, which could unlock up to GBP 80 billion of financing, alongside proposals to expand permitted risk management products, widen exposures to counterparties carrying out activities already permitted inside the ring-fence, and allow fuller participation in schemes backed by UK public financial institutions. Alongside these changes, the Financial Policy Committee and Prudential Regulation Authority will review how ring-fencing interacts with the leverage ratio and the Basel 3.1 output floor, and the Bank of England will review the calibration of the internal Minimum Requirement for own funds and Eligible Liabilities scalar. The Prudential Regulation Authority will also consult in summer 2026 on more flexible sharing of operational resources across the ring-fence. HM Treasury will not pursue broader sharing of financial resources across the ring-fence, but will consult on targeted changes for surplus transfers in closed ring-fenced bank pension schemes. The GBP 35 billion primary threshold will be reviewed every three years, with the first review in Q2 2028, and ring-fencing-specific reporting requirements will be reviewed in 2028.
HM Treasury2026-05-18
United Kingdom's HM Treasury sets out ring-fencing reforms and plans New Growth Allowance worth up to GBP 80 billion
The United Kingdom’s HM Treasury has concluded its review of the bank ring-fencing regime, retaining structural separation while proposing reforms via the Financial Services and Markets Bill and secondary legislation to align the framework more closely with prudential and resolution rules and give the Prudential Regulation Authority greater rulemaking flexibility. A summer 2026 consultation will cover a New Growth Allowance of up to 10% of a ring-fenced bank’s risk-weighted assets, potential expansion of permitted products and counterparties, and more flexible sharing of operational resources, alongside reviews of interactions with the leverage ratio, Basel 3.1 output floor and internal MREL calibration.