UK: Don’t abolish the trading book

Author: Danielle Myles | Published: 6 Sep 2010

Abolishing the trading book will not solve capitalisation problems, as proposed by the UK Financial Services Authority (FSA) in its discussion paper on the prudential regime for trading activities.

Some believe the reform, one of four options put forward in the DP 10/4 report, is a drastic and misguided measure which outweighs the regime’s shortfalls.

“Is the regime so dramatically flawed? I doubt it,” said Barney Reynolds, head of the financial regulatory group at Shearman & Sterling in London. “It’s pretty radical to tear it up.”

The report suggests...