UK banks can sell some derivatives within "ring-fence"

LONDON, June 25 Wed Jun 25, 2014 1:50pm EDT

LONDON, June 25 (Reuters) - Britain said it will allow domestic retail bank operations that are being separated from riskier investment banking to provide some basic derivatives products to small business customers, in a move welcomed by business groups.

Britain is introducing new rules that will throw a protective boundary around domestic high street banking in an effort to protect taxpayers from having to bail out losses made in riskier parts of investment banking. The changes will come into effect by 2019.

The Treasury put final legislation before Parliament on Wednesday setting out the rules on what banks must put within their "ring-fenced" business and what must sit outside.

It now plans to allow banks to sell basic options allowing a company to hedge against any changes in currencies, commodities and interest rates. Under draft proposals, retail banks would not have been able to offer small businesses options to hedge risks.

"Making changes to ensure that simple options and normal trade finance activities are 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," said Matthew Fell, director for competitive markets at industry group CBI. (Reporting by Steve Slater; Editing by Elaine Hardcastle)

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