The most profound structural reform element proposed by the UK’s Independent Commission on Banking (ICB) was the concept of ring-fencing retail savings in systemically important banks (SIBs) that have wholesale and investment banking operations. If the riskier operations of the group result in losses that threaten the bank’s capital base, retail savers can be protected in a separate entity. Its survival might still need a taxpayer bail-out, but only to support the retail bank, rather than mopping up losses from activities such as securities trading.
According to the ICB’s final report in September 2011, “the UK retail subsidiaries would be legally, economically and operationally separate from the rest of the banking groups to which they belonged. They would have distinct governance arrangements, and should have different cultures".
