More heavily regulated retail banks will be able to offer their corporate customers products such as simple options and trade finance despite being ‘ring-fenced’ in future.
This concession was revealed in the final ring-fencing proposals published by HM Treasury. Previous proposals had limited retail banks to being able to offer small- and medium-sized business customers some other derivatives, but not options.
The Act of Parliament creating the ring-fenced banks (retail banks, in other words) requires some business customers to source their basic banking services from retail banks and limits the products such banks can offer. The Act allows retail banks to offer simple financial derivative products, and the Statutory Instruments now submitted to Parliament set out what is included within these simple products. The Statutory Instruments were at first expected to omit any financial option contracts, but they now include some categories of simple financial options.
In a statement, the ACT said: “The inclusion of simple financial options will particularly benefit smaller companies that will either be restricted to ring-fenced banks, or find it difficult to establish relations with wholesale banks that can offer a wider range of products.”
Matthew Fell, director for competitive markets at lobbying group the Confederation of British Industry, said: “The government’s decision on what products to include within the ring-fence strikes a sensible balance.
“Including simple options and trade finance within the ring-fence is an important step to ensuring banks can continue to serve medium-sized businesses as they grow and expand into new markets.”
Sally Percy is editor of The Treasurer