PRA has published a report required by law that looks at the extent of proprietary trading by deposit takers and dual-authorised investment firms. The report looks at:
- the extent of trading;
- the risks trading poses to safety and soundness of firms;
- PRA’s tools to mitigate the risks;
- how other countries have restricted proprietary trading in the banking sector; and
- whether the ring-fencing regime in particular is a powerful enough tool to mitigate the risks.
Generally, PRA says “classic” proprietary trading is not that common, but that other activities falling within the statutory definition are – however, these are in the context of firms’ wider business needs. Where risks occur, they are mitigated by capital and liquidity requirements and the firms’ own controls. PRA concludes that the toolkit at its disposal is appropriate and that it does not need any additional powers.