The UK ring-fencing regime: in the spotlight again

In recent months there has been a renewed focus on the UK ring-fencing regime, with the Chancellor supposedly “open-minded” about the case for further adjustments following the introduction of changes which took effect in February 2025 through the Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2025 (the “2025 SI”). As we wait to see if further changes will materialise, it is worth recapping on the impact of the changes introduced by the 2025 SI. 

The changes: 

• raise the bar for the application of the regime (by raising the core deposit threshold from £25bn to £35bn and by exempting non-GSIB banking groups with proportionately small trading businesses even where the core deposit threshold is met) (referred to as “Ring-fencing thresholds”);
• remove the restriction on the ring-fenced part of affected groups (“RFBs”) having non-EEA branches or subsidiaries and introduce a four-year transition period for complying with the regime where RFBs acquire a bank not subject to the ring-fencing regime (referred to as “Architectural reforms”); and
• help to clarify and expand the scope of the products and services that RFBs can offer, with a particular focus on facilitating the provision of finance to SMEs, permitting exposures to small relevant financial institutions (“RFIs”), broadening the scope of permitted customer derivatives and expanding the scope of receivables that RFB securitisation vehicles may hold (referred to as “Permitted products and services” and “Definitions and technical amendments”).