ECON Draft Report on Structural Reform of EU banking sector

On 13 March 2013, the EU Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report on reforming the structure of the EU’s banking sector.

The report welcomed the Liikanen Group’s analysis and recommendations on banking reform, concluding that, while current proposals for reform of the EU banking sector are important, a more fundamental reform of the banking structure is essential.  Accordingly, it urges the EU Commission to draft a proposal for full and mandatory separation of banks’ retail and investment activities via ring-fencing around those activities that are vital for the real economy.  According to ECON, mandatory separation should result in:

  • separate legal entities;
  • separate sources of funding for the bank’s retail and investment entities;
  • the application of adequate, thorough and separate capital, leverage and liquidity rules to each entity (with higher capital requirements for the investment entity); and
  • net and gross large exposure limits for intra-group transactions between ring-fenced and non-ring-fenced activities.

 

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