On February 4, Britain’s HM Treasury introduced legislation—entitled the Banking Reform Bill—that would provide regulators with new authority to break up a bank if its investment activities put deposits at risk. The legislation goes a step beyond previously proposed policies that would merely require banks to separate retail banking from investment banking. Under the proposed legislation, in addition to requiring that institutions ring-fence deposits, the Bank of England could force an institution to sell off certain businesses if it determines that the institution has failed to protect retail banking activities from high-risk investments. The bill also would, among other things, provide depositors preference if a bank becomes insolvent, and set new leverage caps. The introduction of the bill is the first step in the legislative process, which Britain’s Chancellor of the Exchequer stated he expects to be finalized next year.

On September 12, in advance of expected legislation that will restructure the United Kingdom’s financial services regulatory framework, the Financial Services Authority (FSA) published the first in a series of Consultation Papers meant to support implementation of the reforms. The Parliament is expected to finalize later this year the Financial Services Bill that will abolish the FSA, create the Financial Conduct Authority (FCA) to regulate financial service provider conduct in retail and wholesale markets, and shift safety and soundness regulation to the new Prudential Regulation Authority (PRA), among other changes. The first Consultation Paper outlines changes to split the existing FSA handbook into new rulebooks for the FCA and PRA. All regulated firms are encouraged to review the Consultation Paper, and the FSA has asked for comments to be submitted by December 12, 2012.