Brussels, 02/07/2013 (Agence Europe) - On Wednesday, the European Parliament (EP) adopted the draft McCarthy report demanding EU legislation to ensure better separation of retail banking from speculation within the same bank.
The draft report by Arlene McCarthy (S&D, United Kingdom) says that “national initiatives for structural reform require an EU framework to preserve and prevent the fragmentation of the EU's single market, while respecting the diversity of national banking models”. The report welcomed the Commission's “intention to bring forward a directive for structural reform of the EU banking sector in order to tackle problems arising from banks being 'too big to fail'”.
France and Germany have introduced reforms of their own banking systems to limit the impact on retail banking of the collapse of a bank due to its speculative business.
The MEPs say the bank reforms should: a) reduce excessive risks and complexity; b) hive off essential activities like lending, payments and deposits from non-essential, risky, operations; c) set up an effective European bank resolution system to ensure ordered dissolution of failed banks without taxpayers being forced to cough up; and d) ensure that investment and speculation are not given implicit state guarantees or subsidies and are not bailed out taxpayers.
The MEPs are calling for EU legislation on shadow banking, and want the Commission to monitor proper application of the new EU rules (CRD IV) restricting variable pay and bonuses for bankers.
Finance Watch, a citizen watchdog for the financial industry, welcomes the EP's desire to take action in this domain and urged political leaders to display the political will to properly tackle the too-big-to-fails. It says the cost in the short term of such a reform would be outweighed by the benefits for the general interest in slimming down the banks so that they are less likely to jeopardise financial stability if they collapse. (MB/transl.fl)