LONDON (Reuters) - Customers at British retail banks risk facing disruption in day-to-day banking as major lenders ring-fence their high street businesses from investment banking operations , the Bank of England said on Friday.
Speaking at an event, James Proudman, the central bank's executive director for supervision of deposit takers, reiterated that there was no room for manoeuvre on the January 2019 deadline for banks to separate the businesses.
Ring-fencing deposit-taking operations from riskier, investment banking was a central reform following the financial crisis which forced taxpayers to bail out several lenders.
Britain's vote last year to leave the European Union and the upheaval it could mean for the banking sector had, however, raised hopes ring-fencing would be pushed back.
"The Bank of England will require full and prompt implementation of the ring-fencing legislation and requirements by 2019," Proudman said.
"As with any big infrastructure project, there is some potential for disruption to everyday activities as new group structures are moved into place and new ways of operating are brought online," he said.
The aim of the reform is to ensure that day-to-day banking will be insulated with enough capital to continue unaffected if problems emerge in investment banking.
It will be a major change to the structure of British banking, with 75 percent of customer deposits being affected by the reorganisations within lenders.
Banks estimate almost a million people and businesses will see changes to their bank account details as they are placed on the right side of the fence.
"To minimise the disruption these changes could cause to customers, banks will ensure that any outgoing payments, for example standing orders and direct debits, are made as normal," the BoE said. Banks and payment schemes will also redirect any incoming payments to the new accounts.
Some banks will need to move the assets and liabilities of significant numbers of customers from one legal entity to another to comply with the legislation. A judge will consider the impact of this on customers and others.
HSBC has already set up a separate high street lender, HSBC UK, which is due to open its new head office in January.
"While the timelines vary, all banks plan to meet this tight deadline, with the bulk of restructuring activities planned from now to mid-2018," Proudman said.
Editing by David Clarke