Following the financial crisis, UK legislation was passed to better protect customers and the day-to-day banking services they rely on. The new rules mean large banks must separate personal, business and most simple wholesale banking activities from risks in other parts of the business such as complex wholesale and investment banking. This is called ‘ring-fencing’.
Banks are taking different approaches to how they are implementing these rules and are starting to make changes now, to complete them by 1 January 2019.
What ring-fencing means for Lloyds Banking Group
As a simple, UK retail and commercial bank, the impact on the Group is relatively limited.
Once we have completed our ring-fencing changes, Lloyds Banking Group will comprise of the following:
A ring-fenced sub-group: including the majority of our Bank of Scotland, Lloyds Bank and Halifax banking activities including current accounts, savings and deposits.
A non-ring-fenced sub-group: Primarily for Commercial Banking Markets Financing (including loan markets, bonds and asset securitisation), Commercial Banking Financial Markets Products (including elements of FX and rates), the business undertaken by Lloyds Bank International Ltd and the Group’s branches in the United States, Singapore and Crown Dependencies.
An insurance sub-group: Scottish Widows Group Ltd and subsidiaries.
An equity investments sub-group: Lloyds Development Capital and other strategic investments.
To achieve the above structure we are creating a new non-ring-fenced bank, Lloyds Bank Corporate Markets plc*. Subject to approvals, the new bank will, in line with the ring-fenced entity, be authorised by the Prudential Regulation Authority (PRA) as a bank in the UK and supervised by the PRA and the Financial Conduct Authority (FCA).
Each sub-group will operate alongside but independently from each other within Lloyds Banking Group.
What ring-fencing means for our customers
The majority of the banking services we provide are not affected and will be ring-fenced. Most customers will not see any changes. Bank account details will stay the same and the vast majority of our customers can carry on banking as they do now.
Where customers have existing business with us that cannot be provided inside the ring-fence we plan to transfer this to Lloyds Bank Corporate Markets. Additionally, the banking activity that we carry out outside of the European Economic Area will also become part of the non-ring fenced sub-group.
We are contacting customers who are affected to explain what the changes will mean for them.
Transferring contracts and products to Lloyds Bank Corporate Markets
UK-based banking activity
As part of our ring-fencing changes, we are transferring some business provided by Bank of Scotland or Lloyds Bank, for example some of our Commercial lending, trade finance and markets products, to Lloyds Bank Corporate Markets.
The transfer of certain contracts and products to Lloyds Bank Corporate Markets requires Court approval and a hearing is currently scheduled for 27 March 2018 to authorise the process. The Court process is called the Ring-Fencing Transfer Scheme (RFTS).
On the basis that we have been granted approval to proceed, we expect the changes to take effect in mid-2018.
Relationship Managers have been in contact with the relatively small number of clients who will be affected by this over the course of this year in order to prepare them for the changes.
Banking activity outside of the UK
Transfers of contracts and products not covered by UK law will not be included in the RFTS. Separate local and legally compliant processes will be used.
For other interested parties
Where there are ring-fencing related changes for other parties, such as employees, regulators and suppliers, we will be in contact to provide further information. As with our approach for customers, the impacts will be limited.
Participating in the RFTS Court process
Anyone who thinks the implementation of these changes may negatively affect them has the right to participate in the Court process. Details of how to do this will be provided from this page after the Court ‘Directions’ hearing in December 2017.
The RFTS court dates are as follows:
25 September 2017: Interim hearing, for preliminary directions on some of the communications we need to make for the RFTS
4 December 2017: Directions hearing to seek the Court’s approval for our application for the Court process to begin, including our overall plan for the communications we need to make for the RFTS
27 March 2018: Sanction hearing. At the sanction hearing the Court will consider and, if it sees fit, approve the RFTS.
All dates are subject to change.
This page will be updated with information on how to participate in the Court process after the hearing in December 2017 and details for our customers are available through our various banking brand websites. Leaflets for customers are also available in our branches.
Progress updates will also be included, where appropriate, in the Lloyds Banking Group quarterly results.
Where to go for more information
You can find out more about ring-fencing and Bank Structural Reform Legislation, on the Financial Conduct Authority’s website www.fca.org.uk/consumers/ring-fencing and the Bank of England’s website www.bankofengland.co.uk
There’s more about ring-fencing on our brand websites including at:
Be extra vigilant about fraud
Although the majority of our customers will see no changes, other banks will be making changes related to ring-fencing.
During this period of change you should be extra vigilant about fraud. Don’t assume that letters, phone calls, emails and text messages are genuine even if the person knows information about you.
Employees from our banking brands will never phone or email customers to ask for information such as usernames, user IDs or PIN numbers. Similarly we will not ask customers to move money to a so-called secure, safe or holding account or ask customers to transfer funds to a new sort-code and account number.
*Lloyds Bank Corporate Markets plc is the business name for Lloyds Banking Group’s new Non-Ring-Fenced Bank. Lloyds Bank Corporate Markets plc was authorised with restrictions on 25 July 2017, and is now included on the Financial Services Register (Reference number: 763256). Until the restrictions are removed by the Prudential Regulation Authority (PRA), Lloyds Bank Corporate Markets plc is limited in its ability to undertake or have migrated to it any regulated financial services activities.