Today’s plans include a ban on proprietary trading for banks that are labeled by international regulators as systemically important to the global economy, or whose activities surpass certain financial thresholds. The ban would apply starting in 2017, and is more narrowly defined than the U.S. Volcker Rule, Barnier said.
Regulators, such as the European Central Bank, would be required to assess whether these banks should be forced to structurally separate by pushing some of their derivatives and other trading activities into legally distinct, and independently capitalized, units. Exemptions to this process would be allowed in cases where regulators can show they have already taken measures of equal ambition.
France and Germany last week submitted a joint note to the commission arguing that elements of the planned rules on structural separation would go too far in curtailing lenders’ involvement in some kinds of trading. This could jeopardize “the financing of the economy in a crucial recovery phase,” they said. Still, both countries have said that they back having an EU initiative.
Barnier’s approach goes “further” than French and German national initiatives, both in terms of introducing a proprietary trading ban and by envisaging a deeper form of structural separation, the EU commission said today.
The EU plans are the commission’s follow-up to a report from a consultative group led by Bank of Finland Governor Erkki Liikanen that Barnier set up in 2011.
It’s positive “all in all” that the commission has presented proposals that take forward the Liikanen group’s work, Marianne Kothe, a spokeswoman for the German finance ministry, said today.
Important points for Germany going forward are that the “universal banking system is to remain intact and that there won’t be any negative consequences for us as far as the financing of the real economy is concerned,” she said.