§ Mr. Austin Mitchell
To ask the Chancellor of the Exchequer what proposals he has for regulation of derivative markets to ensure that the bank exposure is geared to a fixed ratio to the capital of the bank concerned.
§ Mr. Nelson
[holding answer 2 March 1995]: We have no current proposals for further regulation of derivatives. The Bank of England already sets a variety of capital requirements for credit institutions depending on the nature of business in which they are engaged. The capital adequacy directive, which comes into force at the end of this year, provides for EU-wide rules on the capital which must be held against market risks, including those involved in derivatives markets.
As my right hon. and learned Friend told the House on Monday 27 February, he has asked the Board of Banking Supervision to investigate fully and urgently all aspects of the Barings episode and to report back to him. Any lessons to be drawn must await a thorough analysis.