New ring-fencing rules could mean your bank details will change. Here’s what you need to know, what you need to do and how to avoid falling for scammers capitalising on the overhaul.
The UK banking system is undergoing a serious overhaul that early estimates suggest will impact nearly a million customers.
New ring-fencing rules mean the UK’s biggest banks need to make changes that could require account details like sort codes to be changed.
There are fears that the transition could lead to chaos and a surge in banking scams as fraudsters capitalise on the shift and uncertainty.
Here’s what you need to know.
What is bank ring-fencing?
Ring-fencing is a major change that is designed to make the UK financial system a lot safer.
It’s new legislation that will require big banks to separate their retail business (the part that deals with things like current accounts, savings accounts, mortgages and loans) from riskier institutional activities like trading in financial markets.
The new rules will make sure our daily banking activities are better shielded from shocks to the wider financial system.
How will you be impacted?
Some retail bank customers will be impacted when larger banks split into two separate legal entities.
The Financial Conduct Authority (FCA) and Bank of England says this could mean your bank chooses to change your sort code and/or issues you with a new bank account number to comply with the new rules.
You might find that you are also impacted with extra admin as you may need to update details of recurring payments to firms whose bank details have changed in the shakeup.
Which banks have to make changes?
The Bank of England says only the largest banks will have to separate their retail banking services from their investment and international banking activities.
Ring-fencing rules apply to banks with more than £25 billion of consumer and small business deposits.
So, smaller banks like TSB and Metro Bank won’t have to make any changes, but larger banks like HSBC, Barclays and Santander will.
Each bank will have its own strategy to comply with ring-fencing.
Barclays has confirmed that it will be issuing new sort codes to those who’ll be moving to the ring-fenced Barclays UK and those that will need to be moved to the non-ring-fenced Barclays Bank PLC. The change will impact around 900,000 personal, business and corporate accounts.
Meanwhile HSBC Bank plc says it will be transferring almost all of its personal and business customers in the UK to a new ring-fenced bank called HSBC UK.
Wholesale customers will remain in HSBC Bank plc which will become the non-ring-fenced arm. As a result HSBC says sort codes will change for a "small proportion of customers".
A spokesperson from Lloyds Banking Group confirmed to loveMONEY that Lloyds, Halifax and Bank of Scotland customers will not see any of their account details changed.
What you need to do
Payments using old sort codes will be automatically redirected for a ‘significant period of time’, according to the FCA and banks will take responsibility for updating Standing Orders and Direct Debits.
Barclays told us payments made using the old sort code will be redirected for 36 months in the same way they are under current account switching rules and it will take care of updating Standing Orders and Direct Debits.
HSBC will also cover the admin.
A spokesperson for HSBC told loveMONEY: “HSBC is committed to making this process as straightforward as possible for the small proportion of customers impacted.
"For most of our personal and business customers impacted, the process is automated and we will automatically update any regular payments like Standing Orders and Direct Debits.”
So, you won’t need to do anything to your existing Standing Orders and Direct Debits but for any new payees you should provide up-to-date details once you get them.
When are the changes happening?
All banks have to make the appropriate changes to their operations before 1 January 2019, but given the size of the overhaul banks are likely to be contacting customers well before this deadline.
Barclays told us it will probably start contacting customers in batches later this year with new sort codes issued by Easter 2018.
A Barclays spokesperson told loveMONEY: ““As Barclays implements ring-fencing, it will need to change the sort codes of a small proportion of retail customers and some corporate clients.
"We have worked hard to minimise the number of customers and clients impacted. We will be communicating with customers and clients well in advance of any changes and are committed to making the process as streamlined as possible for them.”
Scam warning
The FCA has warned that bank customers should be especially vigilant for banking and online account scams during this transitional period.
It says you should watch out for calls that come out of the blue claiming to be from your bank. Hang up and call your bank on the number written on your card or bank statement.
You should also remember that your bank will never call or email asking for your personal information, account details or the PIN for your bank or credit card.
If you have any concerns about the communications you receive about ring-fencing get in touch with your bank.
HSBC told loveMONEY that communications will be sent via letter and include a specific ring-fencing helpline which can be verified by looking at its website.
For more information check out the Bank of England’s website.
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