U.K. Bank Ring Fence May Store Up as Much Trouble as Brexit (1)

Britain took a step into uncharted territory this year, aiming to make its banks safer. But it might have just driven risk to places where it’s less manageable than before.

The experiment -- the result of an analysis of how the financial crisis damaged Britain’s economy -- began Jan. 1. Big lenders were “ring-fenced”: retail deposit-taking was legally separated from riskier activities, primarily investment banking. Advocates compared ring-fencing to the U.S. Glass-Steagall act, passed after the 1929 crash.

Britain’s big international players, Barclays Plc and HSBC Holdings Plc, are now barred from moving much of their domestic earnings into ...