The Prudential Regulation Authority (PRA), the UK’s banking regulator, is set to launch a consultation aimed at reforming shared operational services rules for ring-fenced banks, potentially reducing compliance costs for the country’s largest lenders.
The planned changes would give banking groups greater flexibility in how they share operational resources — such as data processing, IT infrastructure and back-office functions — across the ring fence that separates retail and investment banking activities. The PRA intends to publish the consultation this summer.
Ring-fencing was introduced in 2019 as a post-financial crisis safeguard, requiring any bank holding more than £35bn in core deposits and conducting material investment banking activity to separate its retail and investment banking operations. The regime was designed to shield customer deposits and preserve financial stability. The PRA argues that reform is now viable without compromising safety or resilience, pointing to the maturation of the UK’s bank resolution framework as a key enabler of the proposed changes.
The consultation forms 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 PRA collaborated closely with HM Treasury throughout the review process. The move also advances the PRA’s secondary objective around competitiveness and growth.
The announcement builds on a series of recent regulatory changes intended to strengthen the competitiveness of the UK banking sector. These include the Financial Policy Committee’s recommendation to reduce the benchmark for capital requirements from 14% to 13%, simplification of capital rules for smaller firms through the Strong and Simple framework alongside 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 — with the full resolvability regime now focused on only the largest and most complex firms.
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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