Banks that have branches or subsidiaries on the Isle of Man are to adopt UK ring-fencing regulations to ensure that the security that customers enjoy on the mainland will be extended to the jurisdiction, the head of the Isle of Man Bankers Association (IOMBA) has said.
Ring-fencing is the name given to the process whereby banks are effectively divided to create separate ring-fenced entities that separate retail banking from investment or ‘casino banking’ activities.
The regulations came in the tail of the 2008 global financial crisis and now require UK banks to keep current and savings accounts separate, but the regulations do not cover the Isle of Man, which is outside UK jurisdiction.
The arrangements must be finalised and in place by January 1 2019.
Isle of Man and other territories outside the new arrangements
However, IOMBA president Chris Till, pictured above, flagged up the fact that the regulation will not protect customers on the Isle of Man or account holders elsewhere using Isle of Man bank accounts.
He said: “Ring-fencing has been introduced into legislation by the UK government following the recommendation of the Vickers Report into the issues with UK banks during the financial crisis and the fact that the UK government had to bail out a number of banks.
“Ring-fencing affects the Isle of Man to the extent that those banks on the island, which are part of large UK high street banks and along with those in the other crown dependencies, will likely to be outside the ring-fenced bank in the UK.”
One bank that will be affected is Santander, which has presences on the Isle of Man and Jersey.
It said: “We are also expecting to conduct similar local transfer processes next year in Jersey and the Isle of Man in respect of our businesses there, subject to relevant regulatory and court approvals.”
Regulation to protect day-to-day essential banking services
In a statement, the Financial Conduct Authority said, “Ring-fencing legislation requires each large UK bank to separate its retail banking activity from the rest of its business.
“This is to protect customers and the day-to-day banking services they rely on from unrelated risks elsewhere in the banking group and shocks affecting the wider financial system.
“It reduces the likelihood that essential banking services used by ordinary depositors, like current accounts, savings accounts and payments, are put at risk by a failure in another part of the business, such as investment banking.”