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 UK banks must separate personal banking services such as current and savings accounts, from risks in other parts of the business, like complex wholesale and investment banking. This is called “ring-fencing”.
These new rules went live on the 1 January 2019.
You can find out more about ring-fencing and bank structural reform legislation, on the Financial Conduct Authority’s website and the Bank of England’s website.
The legislation requires all UK banking groups with core deposits - broadly deposits from retail and small business clients - of over £25bn (averaged over a 3 year period) including their branches in the European Economic Area (EEA), to separate their activities into:
- A ring-fenced bank (RFB) – for retail activities, and which is also permitted to carry on most commercial activities.
- A non-ring-fenced bank (NRFB) – for complex wholesale client banking needs and banking that is booked outside the European Economic Area (EEA).
Our approach to ring-fencing
The impact on the Group is relatively limited and there will be minimal impact for the majority of the Group’s retail and commercial customers.
Most Lloyds Bank, Bank of Scotland and Halifax banking activities including current accounts, savings and deposits will be ring-fenced.
We've set up a new bank
We've set up Lloyds Bank Corporate Markets plc as our non-ring-fenced bank so that we can continue to offer most of the products and services which will not be available from Lloyds Bank plc and Bank of Scotland plc - the ring-fenced banks, under the new legislation. Both the ring-fenced banks and non-ring-fenced banks are part of the wider Lloyds Banking Group but operate as separate banks.
Following the completion of our ring-fencing changes, Lloyds Banking Group comprises of the following:
A ring-fenced sub-group
Comprising the majority of our Lloyds Bank, Bank of Scotland and Halifax banking activities including current accounts, savings and deposits.
A non-ring-fenced sub-group
- Commercial Banking Markets Financing, including loan markets, bonds and asset securitisation
- Commercial Banking Financial Markets Products, including elements of FX and rates
- 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.
Each sub-group will operate alongside but independently from each other within Lloyds Banking Group.
A structure chart showing the Group structure upon completion of our ring-fencing changes is shown below.
Ring-fenced and non-ring-fenced entities within a UK banking group are rated separately by the credit rating agencies, as shown here.
We will publish financial information relating to Lloyds Bank Corporate Markets plc, as it becomes available. You can view the Unaudited Pro Forma Financial Information here. Any financial information that is made available in relation to Lloyds Bank Corporate Markets plc is expected to be illustrative only at this stage and should be reviewed alongside the disclaimers that accompany that information.