EU banks spared ringfencing rules imposed on British lenders

Banks in the European Union will not have to follow Britain’s lead and split into separate retail and investment operations after Brussels ditched a long-planned ringfencing law.

UK lenders have spent billions of pounds carving out protected retail banks with their own capital ahead of domestic legislation kicking in next year.

But their counterparts on the Continent will not have to follow suit after the European Commission confirmed today it had scrapped equivalent plans, first unveiled three years ago.

In papers published today the Commission said there was “no foreseeable agreement” on the changes and admitted the plans had “not progressed since 2015”.

However it argued other European financial regulations, including on the resolution of failed banks, would have the same desired effect of achieving financial stability.

Ringfencing is devised to help protect consumer and business depositors from any collapse by a bank’s riskier investment activities.

But they have long been opposed by European banks, while major countries France and Germany refused to champion them.

Michael Barnier, now chief Brexit negotiator for the bloc, originally drew up the proposals when he was the EU’s financial services commissioner between 2010 and 2014.