Explanatory note

to allow a grace period of 12 months during which an account holder which has ceased to satisfy the definition of “relevant financial institution” can continue to bank with a non-ring-fenced body (article 4(1)(c));

to introduce a four year transition period for UK deposit-takers which are acquired by a ring-fenced body (article 5(1)(c));

to increase the amount of core deposits which may be held by a non-ring-fenced body from £25 billion to £35 billion (article 5(2));

to permit UK deposit-takers to hold trading assets without becoming a ring-fenced body, provided that the value of its trading assets is always less than 10% of the value of its tier 1 capital (article 5(1) and (3)).

to allow a ring-fenced body to have correspondent banking relationships with more than one bank or other payment service provider (articles 8(1)(a)(i), (vii) and 10(1));

to allow a ring-fenced body to have exposures to certain types of financial institutions which are SMEs (article 8(2)(b)(iii));

to allow a ring-fenced body to hedge against longevity risk and mortality risk (articles 8(1)(a)(iv), (v), 9(1)(b) and 10(2)(c));

to extend the range of assets which may be held by a sponsored structured finance vehicle of a ring-fenced body (article 8(3) and (4));

to allow a ring-fenced body to acquire certain instruments issued by an issuer as part of arrangements for restructuring the debt of the issuer or a group undertaking of the issuer, to mitigate the actual or potential financial difficulties of the issuer or one or more of its group undertakings, whether or not a release of all or part of that debt forms part of the arrangements (article 9(1)(c) and (d));

to allow a ring-fenced body to deal in investments to remedy or prevent the failure of a transaction due to error, or to test a new or changed product or service of the ring-fenced body (articles 9(1)(f) and 10(2)(e));

to allow a ring-fenced body to invest in small businesses based in the United Kingdom directly or through certain funds or investment companies, subject to certain conditions (articles 9(3) and 10(2)(e)).

to permit a ring-fenced body to offer inflation swaps (article 9(5)),

to permit a ring-fenced body to sell foreign exchange collars to its customers (article 9(6)),

to extend the range of transactions a ring-fenced body may enter into in the course of providing trade finance for its customers (article 10(3)),

to allow a ring-fenced body to incur exposures to a relevant financial institution of £100,000 or less (article 10(7)), and

to remove the prohibition on a ring-fenced body establishing a branch or holding an interest in undertakings incorporated outside the United Kingdom and the European Economic Area (article 10(8)).