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London - Britain's biggest lenders have only a day before the deadline passes for submission of their plans to protect ordinary customers from the banks' risky activities, starting a four-year industry overhaul that will cost billions of pounds.
The Bank of England is forcing the banks to set up a boundary around their branch operations to protect taxpayers from any repetition of the multibillion-pound bailouts required during the financial crisis of 2007 to 2009.
Among the requirements will be new boards of directors for the ring-fenced entities, new staff contracts and separate pension schemes. Banks will also need to separate their risk-management and IT operations.
High operational costs
The cost of running the separated operations with higher capital standards is likely to cost the industry between £1.7bn and £4.4bn a year, Britain's finance ministry has estimated.
Any bank with £25bn of UK deposits will need to set up a ring-fenced unit by 2019. At present, six lenders would need to do so: HSBC, Lloyds Banking Group, Barclays, Royal Bank of Scotland, Santander UK and the Co-operative Bank.
Another batch has deposits of almost £25bn and could be above that level by 2019. These include TSB and Virgin Money, both of which told Reuters on Monday that they will be submitting ring-fencing plans.
The plans must be submitted before Wednesday and the Bank of England has indicated that it will be flexible in the way different banks are handled under the new rules and will not adopt a "one size fits all" approach.
Financial 'scrutiny'
However, Andrew Tyrie, head of an influential parliamentary committee that scrutinises Britain's finance ministry, has warned that banks could look to find ways around the ring-fence and should face the threat of being broken up if they do.
Britain's biggest customer-facing banks - Lloyds and RBS - hope to include as much as possible within the ring-fenced entity, whereas those with more risky investment activities, such as Barclays and HSBC, want fewer of their assets to be kept within the ring-fence, industry sources have said.
The regulator will publish final rules in the first half of 2016, giving banks three years to prepare.
"It will then be a Herculean task to implement within each bank the necessary requirements operationally," said Tony Anderson, a partner at law firm Pinsent Masons.
