Structural separation then provides authorities with additional options as part of any subsequent restructuring. Ring-fencing, together with other elements of the post-crisis regulatory landscape, means that the key providers of important retail banking services are less likely to fail following a shock to the economy or the 2 3  See Bank of England (2018), Financial Stability Report, June, page 44. See Bank of England (2016), The FPC’s framework for the systemic risk buffer, May, Box 2. 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  financial system. But if banks do get into trouble, there will be greater certainty that important banking services will continue to be provided without disrupting customers and without the need for Government bail-outs. This is the key difference ring-fencing delivers should we experience a repeat of the financial crisis. What changes are happening? To comply with the legislation, each banking group has had to restructure to ensure that their new ring-fenced banks can meet prudential requirements on a standalone basis, have their own governance arrangements and have viable business models. In some cases, a banking group’s ring-fenced bank has been established as a brand new legal entity. Setting up a bank from scratch is a considerable undertaking, even more so for a bank which will have millions of customers from day one. In fact, last year the PRA authorised the three largest new banks ever established in the UK.
Weak external demand is a significant constraint on economic growth. Moreover, the momentum for the recovery in the global economy may be waning now. As a result of this heterogeneity, there may be significant differences in price dynamics in different industries and regions, both now and in future. This trend is clearly demonstrated by data on consumer inflation in summer. The return to potential in different product markets may occur at a different pace. For instance, in industries focused on domestic demand, this may be a faster process than in export industries; the recovery of the consumer-facing sector may be quicker than in the production of investment goods. Therefore, it is essential to consider not only the general output gap in the economy, that is, the deviation of output from its potential, but also the situation 2/3  BIS central bankers' speeches  in individual sectors. If output in industries focused on domestic demand returns to its potential faster than generally across the economy, this will amplify overall inflationary pressure. We take this into account when analysing the economic situation and making key rate decisions. At present, the effects of deferred domestic demand have been considerably implemented and the overall recovery of the Russian economy is likely to continue at a more moderate pace. This year, both fiscal and monetary policies are contributing to the economic recovery.