Ring-fencing rules designed to separate investment banking from day-to-day retail services among the UK’s biggest lenders have prompted RBS to put Lombard Finance’s Channel Islands unit up for sale.
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.
The arrangements must be finalised and in place by January 1 2019.
RBS has tasked KPMG with arranging and overseeing the sale by auction of Lombard’s offshore business, which industry sources could fetch in the region of £200m.
The proposed sale follows RBS’s decision to close the Lombard unit in Gibraltar, Guernsey and Jersey to new business.
Sources told Sky News that the inability to house Lombard Finance’s offshore balance sheet within RBS’s ring-fenced bank had led management to conclude that the business should be sold.
“It doesn’t work having this in NatWest Markets (RBS’s non-ring-fenced bank) either,” said one source.