Brussels, 30/01/2014 (Agence Europe) - Several political groups at the European Parliament and a number of lobby groups are concerned, often for different reasons, with the European Commission's plan to reform banking in Europe by banning proprietary trading and “rehypotecation” (see EUROPE 11007).
On behalf of the Social Democrats, Hannes Swoboda of Austria recognised the need for action at EU level, but added: “The Commission's proposal comes too late and offers too little. The Commission mainly targets 'the large banks that are too big to fail'. This means that smaller banks, which account for 99% of the sector, can still gamble with their clients' money”. “While the Commission is proposing a mandatory ban on proprietary trading for the top 30 or so banks, this is seriously undermined by a very restrictive definition of proprietary trading”, commented Philippe Lamberts (Greens/EFA, Belgium), pointing out a number of regulatory gaps and areas of legal vacuum in the draft rules. The vague definition of proprietary trading, he says, would enable banks to speculate and pretend it was simply coverage or deals carried out for clients. He says that strict ring-fencing of negotiations would have been a far more effective approach. Syed Kamall (ECR, United Kingdom) said: “The initiative will not tackle the fundamental causes to prevent a repeat of the financial crisis. We must not only remove the state guarantee but also make sure bankers are subject to much tougher liability standards. International accounting standards also need to be overhauled so that banks' accounts reflect reality, not what bankers and their accountants want them to look like”. The Left in Europe takes a hard line. “Barnier's proposal does not even address the 'too big to fail' issue. Under this proposal huge banks wouldn't have to be split up into smaller parts, they would simply have to stop a very small proportion of their proprietary trading or transfer it to another entity in the same group”, argued Jürgen Klute (GUE/NGL, Germany).
Finance Watch, which defends the general interest in the financial field, feels “the text sets the correct objectives for bank structure reform but lacks the legal means to deliver them. The decision to separate is left to competent authorities, while key Member States have expressed unconditional support for their national too-big-to-fail champions against the very idea of separation”. Finance Watch also criticises the “numerous carve-outs, most surprisingly the exclusion of derivatives trading from a key decision-making process”.
The financial industry sees things differently. The European Banking Federation (EBF) is deeply concerned over the Commission's proposal, saying it could upset the structure of banking at the very time that the European economy is emerging from crisis. “The broad scope of trading activities potentially subject to a separation requirement is very likely to hamper banks' role in the economy, activities such as market-making.” In the same vein, the French Banking Federation (FBF) says the Commission's plans would jeopardise the potential ability of big continental European banks to provide effective aid to businesses on the markets at the time that new prudential rules require a snowballing of this type of financing. Moreover, by dealing with different member states in a different manner, with a derogation that only seems to apply to the United Kingdom, the proposal would generate a new risk of segmentation on the European market that goes in the opposite direction from the construction of Europe. French legislation is not as far-reaching as the planned EU rules, which is being criticised very sharply. Christian Noyer, governor of the French central bank, says the ideas on the table are irresponsible and not in the interests of the European economy. (MB/transl.fl)