Millions could have to change bank sort code under ring-fence rules
16 January 2015
Britain’s major banks have warned that new rules designed to “ring-fence” their retail operations to protect consumers could mean tens of millions of people being forced to change sort codes.
The Telegraph reports that the BBA, which lobbies on behalf on the UK's banks, said the Bank of England rules, which will force the legal separations of high street banks from investment banking operations, could disrupt payment systems if the banks are not given enough time to deal with the issue.
The group, in its submission to a consultation on the reforms, called for the Bank to finalise the rules before the expected deadline of the first half of 2016.
By 2019, banks will have had to legally separate their retail and wholesale arms, under rules designed to prevent consumers and small businesses being exposed to banks’ more volatile trading arms.
However, separate legal entities will require separate sort codes – the six-digit numbers that identify the bank and branch associated with an account.
Either the retail arm or the non-ring-fenced commercial operations will have to be set up as a new structure and thus have to use new codes.
Although banks could prevent consumers from being forced to switch by making the non-ringenced entity the new structure, this would mean the part of the bank used by large corporations changing sort codes.
Since this could also disrupt inter-company payments, and force a paperwork headache, some believe it would be less troublesome to set up the retail banking arms as new entities.
The BBA said the impact would be similar to the changes seen by Lloyds customers who were switched to TSB in 2013, a process that was seen as causing minimal disruption. However, the body said the effect would be much greater.
“The scale will be much bigger and will involve several banks, increasing risk, concern about systems integrity and customer impact," it said.
"In order to deliver the reforms on time, banks, the regulatory authorities and a number of government agencies will need to pull together to avoid any bottlenecks," said BBA executive director Paul Chisnall.
"In particular we'd like the regulators to try to put in place the new regime as quickly as possible to allow banks to make final decisions about how to structure their businesses."
We don’t need to tell payroll professionals the headache this could cause if high volumes of sort codes need to be changed. The Policy Team will keep a close eye on developments and update you accordingly.