Much of the debate on the emergent ring-fence regimes has focused on the question of ‘nationalization in the financial sector’. This is because, although the EU’s Liikanen Report on ring-fencing was actually preceded by the UK’s Independent Commission on Banking’s (ICB) proposals, it diverged from the UK recommendations, effectively creating two competing layers of banking structure reform. Moreover, Liikanen was itself then followed by distinctive national level ring-fencing proposals in France and Germany. Specifically, this paper examines the domestic and social factors behind the national versus supranational debate in ring-fencing. It argues that ring-fencing, particularly in the UK, is heavily influenced by a political and social agenda that is distinctly national in character. More concretely, the paper argues that the management of UK's specific domestic struggles following the crisis is challenged by the additional (supranational) ‘tier’ of ring-fencing reforms. Here the two goals of the ring-fence arguably collide: improving financial stability is perhaps best achieved through a supranational ring-fence and resolution regime; whilst improved confidence amongst electorates is perhaps a challenge for national settlements. I explain this second, somewhat perplexing conclusion through a case study of the ICB recommendations in the UK. Both the severity of the banking crisis and subsequent scandals in the UK and the positioning of the City of London at the forefront of economic planning exacerbated a longstanding legitimacy crisis around UK SIFIs. In line with much post-crisis reform in the UK, policymakers therefore sought to manage the British dilemma – restoring and maintaining the competitiveness of the City whilst containing the crisis of legitimacy – by pursuing a performative and patriotic statecraft. The ICB’s ring-fencing proposals were one such attempt. Yet, the Liikanen recommendations, the conflicting regulatory requirements have threatened to undo the UK’s domestic compromise settlement between the City and the British state.
