Prop trading faces scrutiny

Michael Bow
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THE CITY watchdog should be handed more powers to clamp down on proprietary trading desks at banks, an influential committee of MPs and peers has demanded today.

The parliamentary Banking Commission said the incoming Prudential Regulation Authority should have the power to make banks agree risk exposures in their trading books and report these to MPs.

However, it ruled out outlawing the practice of prop trading altogether.

Prop trading involves an institution trading its funds directly alongside client funds.

The practice has given rise to criticism traders may put the interests of clients second to their own.