BUSINESSES and banks are ramping up the pressure on regulators in a last minute drive to widen the incoming banking ringfence to include trade finance and currency hedging products, City A.M. has learned.
The ringfence is designed to split lenders into a retail bank providing basic financial services to small customers, and a more complex investment bank for larger players to buy sophisticated products.
But trade products used by small firms could be branded as complex by regulators, reducing their availability to SMEs and driving up their cost for firms of all sizes.
The government wants to increase exports and rebalance the economy towards fast-growing countries, but banks and business groups worry excluding trade products from the ringfence could hold back the small firms who want to do just that.
"We support attempts to safeguard high street banking services across Britain, but any sort of reform must be seen in the context of the wider economy," said Suren Thiru from the British Chambers of Commerce.
"The ringfence could create barriers to SMEs to export and to access finance. We are concerned there may be collateral damage as a consequence of the reform."
And the Confederation of British Industry (CBI) is increasing lobbying efforts to widen the ringfence.
"It is a big step for small firms to reach into international markets and it is a concern if crucial access to finance and hedging products falls outside of the ringfence," said the CBI's Matthew Fell. "If we maintain a real focus on this in the coming months it will be the best way to get political traction on this issue."
Banks too are keen for the ringfence to be expanded and finalised as soon as possible.
"We cannot start the detailed process of establishing a new ringfenced bank and moving customers until we are sure as to who these should be and what they should be able to do," said a spokesperson for HSBC, a major provider of trade finance services.
The Treasury is expected to launch a consultation on the exact scope of the ringfence next month.