British banks will be forced to "ring-fence" their retail divisions from their investment-banking businesses, maintaining them as separate operations in a move the U.K. government believes will make banking safer, Treasury chief George Osborne will announce Wednesday.
A person familiar with the matter said Mr. Osborne will also say that retail banks will need larger capital buffers to protect them from losses.
The goal is to insulate risky activities, such as trading, so that high-street deposits won’t be put at risk by banks’ investment-banking operations. Proponents say it could also make a failing bank easier to unwind in a crisis.
Mr. Osborne will stop short of suggesting that any of the country’s biggest banks be broken up, something that will provide reassurance to the sector. Still, banks had also lobbied against ring-fencing, arguing that it would be costly and wouldn’t make the industry safer.
In ring-fencing the two operations, banks will need to have separate staffs, information-technology systems and funding arrangements, among other measures, this person said. Most of the details on the ring-fencing need to be worked out, and how the measures are applied will have a big impact on how they affect banks.
More here: U.K. to Force Separation of Retail, Investment Banking – WSJ.com.
