UK banks can sell some derivatives within "ring-fence"

LONDON, June 25 (Reuters) - Britain said it will allowdomestic retail bank operations that are being separated fromriskier investment banking to provide some basic derivativesproducts to small business customers, in a move welcomed bybusiness groups.

Britain is introducing new rules that will throw aprotective boundary around domestic high street banking in aneffort to protect taxpayers from having to bail out losses madein riskier parts of investment banking. The changes will comeinto effect by 2019.

The Treasury put final legislation before Parliament onWednesday setting out the rules on what banks must put withintheir "ring-fenced" business and what must sit outside.

It now plans to allow banks to sell basic options allowing acompany to hedge against any changes in currencies, commoditiesand interest rates. Under draft proposals, retail banks wouldnot have been able to offer small businesses options to hedgerisks.

"Making changes to ensure that simple options and normaltrade finance activities are within the ring-fence is animportant step to ensuring banks can continue to servemedium-sized businesses as they grow and expand into newmarkets," said Matthew Fell, director for competitive markets atindustry group CBI. (Reporting by Steve Slater; Editing by Elaine Hardcastle)