Ring-fencing
Ring-fencing (Structural Reform)
Definition
The regulatory requirement for large banking groups to separate their core retail banking activities from their wholesale and investment banking operations into a distinct legal entity (the ring-fenced body). Ring-fencing aims to protect essential banking services and insured deposits from risks arising from other parts of the group.
Regulatory Context
Introduced in the UK following the Independent Commission on Banking (Vickers Report), ring-fencing applies to UK banks with core deposits exceeding £25 billion. The US adopted a different approach through the Volcker Rule, restricting proprietary trading rather than requiring structural separation.