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Even 'simple' derivatives should be excluded from ring-fenced banks, former Barclays head tells UK parliament

Nov 01 2012 Peter Elstob, Compliance Complete

Martin Taylor, a member of the Independent Commission on Banking that published its final report in September 2011, has told members of parliament that ring-fenced retail banks should not sell even plain vanilla derivatives. The ICB recommended that retail banks should be ring-fenced off from wholesale investment firms, and that ring-fenced banks should only be allowed to trade derivatives as part of managing their own risks, and not offer them to customers. But the industry has argued that, given adequate safeguards, retail banks could offer their small business customers interest-rate swaps and other "simple" derivatives. Taylor, who was chief executive of Barclays from 1994 to 1998, was speaking on Wednesday to the Parliamentary Commission on Banking Standards, a joint committee of both houses of the UK parliament. Whether ring-fenced banks should be allowed to offer derivatives to their customers is one of the questions that the Chancellor of the Exchequer has specifically asked

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