According to a person familiar with the matter, the much-awaited regulatory proposals may provide relief to retail banking customers in the event of failure of the banks and is expected to come into force by 2019, as reported by The Wall Street Journal.
UK Chancellor George Osborne was quoted by the news agency as saying that the UK government is fundamentally reforming the structure of its banking sector.
"We’ve got to stop problems here in the City of London spilling onto our high streets and putting taxpayers’ money at risk," Osborne added.
According to the proposed regulation, the government will advice that 90% of deposits will have to sit within the ring-fenced bank and that banks will have to name a separate board and risk committee for their ring-fenced banks.
Another significant recommendation likely to be included in the draft legislation is that in the event of a bank failure and the "bail in" of bank creditors, retail deposit holders should be compensated ahead of bondholders.
In line with an independent review of the banking sector published in 2011, the draft is likely to be presented to the parliament this autumn before being voted on or by May 2015 to turn the reforms into law.
