The UK government has accepted arguments, championed by the Law Society, that UK retail banks should be able to offer derivatives to business customers.
The Law Society has consistently argued to the Independent Commission on Banking and HM Treasury that retail banks should be able to offer derivative products to their business customers.
Derivatives can play a vital role in supporting everyday business activity, helping reduce business uncertainty such as fluctuations in exchange and interest rates and volatile commodity prices when used to hedge risk.
Law Society chief Executive Desmond Hudson said it was a real win for businesses and the wider UK economy which would have been disadvantaged by a less competitive banking environment.
'The Law Society played a crucial role by harnessing expertise from our members who specialise in banking law and providing compelling evidence and robust analysis of the impact of the government's proposals.'
Following the decision, HM Treasury tasked the Law Society to produce a policy framework paper on how retail banks might offer derivatives whilst also meeting the government's wider policy objective of increasing stability within the banking sector.
Led by the Law Society, the paper suggested the parameters and protections retail banks may need in order to offer derivatives and was produced in collaboration with the Association of Corporate Treasurers.
Chair of the Law Society's Banking Reform Working Party Dorothy Livingston said the Law Society demonstrated the collective value of its membership by helping shape the debate on derivatives which has the potential to impact millions of customers.
'We've brought real life examples of how the proposed reforms will impact businesses to the table which has proven effective in influencing the outcome of the consultation.'
Tomorrow senior lawyers from the UK's leading law firms will hear from celebrated economics commentator and member of the Vickers Commission, Martin Wolf CBE at a legal breakfast hosted by the Law Society.
'Maintaining the pre-eminence of the City and the UK's reputation as a banking hub was not the mandate of the Independent Commission on Banking. That was rather to reduce the systemic risks generated by the banking sector and promote competition within it.
'The ring-fence will help contain the dangers posed to the UK by its oversized banking sector. It will thereby also strengthen the City and, together with other regulatory reforms, strengthen the UK's reputation as a financial hub,' Mr Wolf said.
The event is expected to generate constructive debate on the impact the ring-fencing of UK retail banks will have on the competitiveness of the banking sector, the City and the UK economy more broadly.
The bill will return to the House of Commons next month where MPs will have a final opportunity to propose amendments to the bill before it moves on to the House of Lords.
Ends
About the Banking Reform Working Group
The Law Society Banking Reform Working Group is comprised of specialist City lawyers in banking law, financial services law, competition law, EU law and international commercial law as well as economists.
Dorothy Livingston, the chair of the Law Society Working Group, was called to give oral evidence to the Parliamentary Commission on Banking Standards on 8 November 2012.
View the evidence
About the Law Society of England and Wales
The Law Society of England and Wales is the independent professional body, established for solicitors in 1825, that works globally to support and represent its members, promoting the highest professional standards and the rule of law.
Press contact
Clare Wills
Law Society Press Office
+44 (0)20 7316 5624
clare.wills@lawsociety.org.uk