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Banks win ringfencing concession

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The retail ringfencing programme for banks is to be less rigorous than feared following changes to the rules.

The Bank of England laid out the policy shift yesterday, which will allow ringfenced institutions to pay dividends back to their parent group.

The programme, which was originally devised as a way to safeguard retail deposits in the aftermath of the financial crisis, has long been a bone of contention for the UK’s banks, which have argued it puts them at a competitive disadvantage to their overseas peers.

The rules on ringfencing are due to come into force from 2019.

Treasury select committee chairman Andrew Tyrie reacted to the decision by questioning whether it has been made after “special pleading” by the banks.

The TSC will next week take evidence from Chancellor George Osborne, Prudential Regulation Authority chief executive Andrew Bailey and Bank of England governor Mark Carney on the Bank of England bill, which will include the reforms.

Tyrie says: “Were it to turn out, in a year or two, that the regulators still do not have the tools they need to do the job, they need to tell us so, and for Parliament to respond.”

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