BANKS advising the government on the industry’s new ringfencing rules are misleading regulators on the kind of products small firms want, and wrongly promoting inappropriately complex products, a leading campaigner told City A.M.
Small firms only want a handful of very basic products, and nothing else should be within the ringfence, the Federation for Small Businesses argues – not the derivative products which banks want to put in the retail arms.
“There is quite a lobby from banks for ‘simple’ derivatives to be in the ringfence, but I have yet to find a simple derivative product,” said the FSB’s Priyen Patel.
He accused banks of claiming SMEs want to be able to buy every product, including derivatives, through their local bank branch – something they cannot do now, even without a ringfence.
Instead, the FSB wants commercial deposit accounts, loans, credit cards, overdrafts and possibly merchant services to be the only business products within the retail entity.
If anything more complex is within the ringfence, Patel warned, it could lead to normal SMEs cross-subsidising the riskier services.