A review panel of the UK’s ring-fencing measures for the country’s retail banks has concluded that the regime should be retained for now but in the long run, the rule could ‘ossify’ the industry.

Keith Skeoch, who chaired the review, in a foreword to the report wrote: “If not addressed, it may lead to the ossification of retail banking as banking services continue to innovate and develop.”

The ring-fencing regime requires banks with over £25bn in deposits to separate their retail operations from their investment banking business to insulate customers from possible losses in the latter.

The government had introduced these measures during the global financial crisis, which forced authorities to bail out lenders.

Currently, seven banks in the UK including Barclays, Lloyds, NatWest and HSBC follow this rule, which they want to be scrapped off.

The panel noted that the ring-fencing regime has been successful in achieving some of its objectives of improving financial stability and is worth retaining at present “but needs to be more adaptable, simpler and more coherent with wider regulation in order to better serve the needs of customers and ensure it can address the risks of the future as well as those of the present and past”.

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Commenting on the impacts of the regime on competition and competitiveness the panel said it has been ‘limited’ but there is potential for larger impacts in the future.

For now, the review panel has recommended keeping the threshold at £25bn.

Its other recommendations include exempting banks that have minimal investment banking activities and are deemed resolvable.