Santander to scrap plan for UK bank split post Brexit

Bloomberg

Banco Santander SA is scrapping plans to separate its consumer lending operations from large corporate and institutional banking in the UK in the wake of the country’s vote to leave the European Union, according to a person with knowledge of the matter.
The Spanish lender is discussing fresh proposals with the Bank of England to meet the regulator’s ring fencing rules, which force major lenders to isolate riskier commercial business from retail operations, said the person who asked not to be identified because the talks are private. Santander is the fifth-largest retail bank in Britain behind Royal Bank of Scotland Group Plc, Lloyds Banking Group Plc, HSBC Holdings Plc and Barclays Plc.
The reversal, which comes after years of preparations to meet the rules due in 2019, may give Santander greater flexibility to move some operations out of the U.K., if necessary after Brexit. Shriti Vadera, the chairman of Santander’s British unit, leads a group of senior global bank leaders warning Brexit could damage the nation’s status as a hub for investment banking and international finance.
“Brexit has created a dilemma for Santander with respect to its need to ringfence U.K. retail operations,” said Jonathan Tyce, an analyst at Bloomberg Intelligence in London. “Should the bank shift its non-ringfenced operations out of the U.K., any disruption in dealing with large cross-border corporate clients post Brexit would likely be limited.”
Santander U.K. Chief Executive Officer Nathan Bostock was preparing to place 173 billion pounds ($215 billion) of retail and small business banking activities within the ringfence under the leadership of his deputy, Javier San Felix. He hired former RBS executive Chris Sullivan last December to run the corporate bank outside of the ringfence with about 28 billion pounds of commercial loans.
The bank may now look to run complex corporate banking activities in Britain from the London branch of its global operations, while using its U.K. subsidiary to house as many retail and commercial assets as allowable under the incoming BOE rules, the person with knowledge of the matter added. About 5 percent of large corporate activities in the U.K. will be run from the London branch, a separate person said. The Financial Times reported the news on Sunday.
“A strength for Santander is having many options, due to our unique model,” a spokesman for the bank in London said in an e-mailed statement. “Santander is the only scale challenger to the big four banks in the U.K. We are committed to supporting our customers in the U.K. and growing our business presence here.”
Santander resumed negotiations to buy RBS’s Williams & Glyn U.K. consumer business after pulling out of earlier talks, two people with knowledge of the matter said in November.