Barclays Successfully Creates A New Entity With Ring Fencing

In sync with the U.K. government’s requirement, Barclays (LON:BARC) (NYSE:BCS) has successfully completed ring fencing. Consequently, its investment banking operation has been separated from the retail lending division. This news was first reported by The Telegraph.

Ring fencing is the largest structural reform imposed on U.K. banks. It requires banks with more than £25 billion in deposits to separate their essential banking services from investment banking operations, effective Jan 1, 2019. This is to prevent a replay of the 2008 financial crisis, when banks’ poor investment decisions put pressure on ordinary depositors, leading to big taxpayer-funded bailouts.

Barclays completed the transformation during the Easter weekend so that the customers face minimum inconvenience and any problems could be taken care before the week starts. Notably, the new ring-fenced bank, Barclays Bank UK PLC, will be headed by Ashok Vaswani.

The new entity has 24 million customers, with £250 billion in assets. For the next three years, the old codes will work and customers will not notice any change as all the standing orders will be automatically redirected. In the meantime, customers will receive their new cheque books with codes.

In fact, Britain’s other major banks like Lloyds Banking (LON:LLOY) Group (NYSE:LYG) , HSBC Holdings (NYSE:HSBC) and Royal Bank of Scotland (NYSE:RBS) are also required to ring fence their banks.

The ring-fencing regulation is expected to create a wide range of strategic and operational issues for legal and commercial functions within U.K. banks. It will have implications for arrangements relating to tax, real estate, employment, pensions, third-party contracts and litigation, and will affect each of the large U.K. banks differently.

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