BCOBS 4.3 Information to be provided by a non ring-fenced body to individual account holders

1Article 14 of the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014 “the Ring-fenced Bodies and Core Activities Order 2014” places a duty on the FCA to make rules specifying the information that a non ring-fenced body must provide to certain classes of individuals. The purpose of this section is to set out those rules.

A non ring-fenced body is a firm which has a Part 4A permission to carry on the regulated activity of accepting deposits and which is neither a ring-fenced body nor an institution which is exempt from the definition of a ring-fenced body. Section 142A(1) of the Act defines a ring-fenced body as a UK institution which carries out one or more core activities under section 142B of the Act for which it has a Part 4A permission. Section 142A(2) of the Act and the Ring-fenced Bodies and Core Activities Order 2014 provide that a building society and certain other classes of UK institution are exempt from this definition. Further, firms do not fall within the definition unless they hold deposits in EEA accounts.

A request made by an individual to switch to an EEA account with a firm is to be regarded as an application to open an EEA account with that firm (it is immaterial if the switch is from an account held with a ring-fenced body in the same group as the firm or whether the existing account will be closed when the switch is complete).

1. (1)

   The summary described in BCOBS 4.3.6R(1) should include a brief explanation that the purpose of ring-fencing is to separate the retail banking activities, on which households and small businesses depend, from wholesale or investment banking activities which may involve a greater degree of risk and expose an entity undertaking those activities to financial problems arising elsewhere in the global financial system.

   It should also indicate that certain ring-fenced bodies carrying on retail banking activities will have to comply with restrictions on the other activities they can undertake, and with rules made by the appropriate regulator intended to ensure that they are capable of carrying on the business of providing the core services related to the acceptance of deposits independently of other members in their group. They will, for example, not be able to carry on activities called ‘excluded activities’ which make them vulnerable to problems arising in the financial system or which may make it more difficult for banks to be wound down in an orderly fashion. The summary should explain that, as a non ring-fenced body, the firm is not subject to these restrictions.

2. (2)

   It is not necessary for the information provided under BCOBS 4.3.6R(2) and (3) to contain an exhaustive list of each specific activity or action that constitutes an excluded activity or prohibited action, so long as the information about the nature of the activities and actions is sufficient to enable the individual to make an informed decision as to whether to open or continue to hold an account with the firm in the light of its status as a non ring-fenced body.

In determining what is “in good time” under BCOBS 4.3.8R, the firm should consider the time at which the information may be most useful to the individual in making a decision as to whether to continue to hold or to open an account with the firm.