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Impact of ring-fence reform on Island banks

Banks in the Isle of Man could be forced to re-structure if UK banking reforms go ahead.

An Independent Commission on Banking report says UK banks should 'ring fence' their retail or domestic, operations from riskier investment banking.

The aim is to make them more resilient to future financial crises and capable of resolving problems themselves, without the taxpayer having to step in. 

But under the reforms, UK institutions could not operate through non-EEA subsidiaries, and the Isle of Man is not currently in the EEA.

That means Manx subsidiaries of UK banks would have to cut ties and stand alone, legally, operationally and economically.

A white paper on the report suggests an exemption may be granted for the Crown Dependecies, but this is yet to be confirmed.

Nick Quayle is Associate Director at KPMG in Douglas and says upheaval in the sector looks likely:

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