Bank Ring-Fencing Schemes – Do You Know Who Your Tenant Is?

What is ring-fencing?

By 1 January 2019, all UK banks with more than £25 billion in retail deposits were required to have separated their retail banking services from their investment banking, also known as ‘ring-fencing’. Ring-fencing aims to increase stability in UK banks and support consumer banking by protecting it from unrelated risks in the wider financial system. The reform, originally proposed by the Independent Commission on Banking following the 2008 financial crisis, was introduced by the Financial Services (Banking Reform) Act 2013.

Six UK banks – Barclays, HSBC, Lloyds, RBS, Santander and NatWest – have undergone restructuring in order to comply with the legislation. The 2013 Act introduced Ring-Fencing Transfer Schemes (RFTS), which allow all or part of a bank’s business to be transferred to another legal entity without obtaining the individual consent of those affected.

What does this mean for me as a commercial property landlord?

In practical terms, the above means that under a court approved RFTS, if you are a landlord of commercial premises with one of the above named banks as your tenant, the bank may have transferred its lease of the commercial premises automatically to a separate legal entity under section 111 of the Financial Services and Markets Act 2000 (as amended) without having to obtain your consent, regardless of any express written terms within your commercial lease.

How many banks have carried our ring-fencing?

Barclays Bank was the first of the banks to have its RFTS approved by the High Court in March 2018. The judgment considered any adverse impacts of the RFTS to third parties, and whether these would be likely to be greater than reasonably necessary. The High Court sanctioned Barclays RFTS on 9th March 2018 with the transfer taking effect on 1st April 2018. Barclays RFTS had the effect of transferring almost 95% of Barclays Bank Plc’s leases of commercial premises to a new separate legal entity, Barclays Bank UK Plc.

Since Barclays had its RFTS approved by a court order, the other remaining five UK banks referred to above have had their RFTS approved by a court.

Why does this matter?

Important legal issues arise a result of the approved RFTS. One particular issue, which as far as we are aware remains untested in the courts and is unclear from legislation, is where a landlord should serve legal notices if a bank’s lease is not registered at HM Land Registry and the landlord has not received notice of the RFTS and details of its new tenant.

Please contact us if you would like more information about the issues raised in this article or any other aspect of commercial property law at 029 2034 5511 or