PRA Proposes Ring-Fence Rule Changes to Cut Bank Costs

The Prudential Regulation Authority (PRA) announced plans to consult on reforming shared operational services rules for ring-fenced banks, aiming to reduce compliance costs. The ring-fencing regime, introduced in 2019, requires banks with over £35 billion in core deposits and material investment banking activity to separate retail and investment operations. The PRA's consultation, to be published this summer, proposes greater flexibility in sharing resources like data-processing, IT, and back-office functions across the ring fence. David Bailey, PRA Executive Director, stated the changes would make rules more proportionate while retaining consumer deposit protections. The reform is enabled by advances in the UK's bank resolution regime and supports the PRA's secondary competitiveness and growth objective. The announcement complements HM Treasury's ring-fencing review and recent PRA and Bank of England measures, including lowering the capital requirements benchmark from 14% to 13%, simplifying capital rules for smaller firms, and increasing MREL reporting thresholds.