Brussels, 06/01/2014 (Agence Europe) - According to the Monday 6 January 2014 edition of the Financial Times, the Commission may drop its plans for cpmplete separation of retail and investment banking in Europe.
A draft directive leaked to the FT only makes compulsory a hiving off of the riskiest types of banking from retail banking (loans to individuals and businesses). The leaked document says this would be less restrictive and give national supervisory bodies greater latitude for the application of the new rules.
In order to ensure greater protection, the draft directive would strictly prohibit some 30 or so banks from trading on their own account. The FT says that EU Internal Market Commissioner Michel Barnier will, at the end of this month or the beginning of February, publish the plans which will follow the recommendations of the 2012 Liikanen Report on separating the most speculative forms of banking from retail banking in order to avoid a repetition of the 2008 financial crisis.
“There is no formal proposal from the Commission at this stage. So any text seen is merely a draft, subject to substantial change, and has no political endorsement from the College” of Commissioners, commented a spokeswoman for Commissioner Michel Barnier in Brussels on Monday, noting that the Commission is planning to unveil draft legislation over the next few weeks and would give a date “as soon as possible”..
Why is legislation needed? The spokeswoman said: “Over the last 5 years, we have put in place in Europe a large number of financial reforms so that we learn all the lessons from the financial crisis. The objective of these reforms is to make the financial sector as a whole more robust and resilient, to reduce the impact of potential bank failures, and ensure the financial sector is once more at the service of the real economy”. “We have made enormous progress, including in the last few weeks on banking union”, adding: “the banking sector is now better supervised and better governed, it is better capitalised and risks are better managed. Rules will also come into force soon to ensure better prevention of bank crises; and if they still do happen that they are managed without taxpayers being the first in line”.
“As things stand, most banks in the new set up will be resolvable without taxpayers having to step in when things go wrong. However, a few very big and complex banks might not be. That is why Commissioner Michel Barnier will present, in the next few weeks, a proposal which is the final piece of the puzzle to solve 'too big to fails', in other words: to ensure all banks can be resolvable and not require taxpayer bailout when they face difficulties. This is essential for the overall systemic stability of financial system”, explained Barnier's press officer, adding that a number of member states have already started taking action at national level so draft legislation is needed at EU level “to maintain a level playing field and consistency in the single market - to ensure that banks don't move to where regulation is weakest for example”, and ensure that problems are not generated for the real economy. (LC/transl.fl)