Experts call for introduction of EU banking barriers

A high-level expert group has delivered a report to the European commission that said risky financial activities must be legally separated from deposit holding banking to ensure consumer safety. Gerald Callaghan reports

By Gerald Callaghan

02 Oct 2012

Leading the group of academics and experts set up by the European commission, bank of Finland governor Erkki Liikanen announced their verdict on Thursday on how best to reform the banking sector, in the wake of the crisis that began five years ago.

Liikanen said, "The report contains the group's recommendations for further reforms of the banking sector, including structural reform. "Building on the substantial measures already under way, I believe that the group's recommendations would, if implemented, provide for a safer, more stable and efficient banking system serving the needs of citizens, the EU economy and the internal market."

The report made several recommendations: mandatory separation of proprietary trading and other high-risk trading activities; possible additional separation of activities conditional on the recovery and resolution plan, possible amendments to the use of bail-in instruments as a resolution tool, a review of capital requirements on trading assets and real estate related loans, and a strengthening of the governance and control of banks.

Speaking at the press event, internal market and services commissioner Michel Barnier said "This is an important report that will inform our policy on regulating the financial sector."

The group was tasked by Barnier in February this year to determine whether a structural reform of EU banks would strengthen financial stability and improve efficiency and consumer protection.

"The report underlines the excessive risks taken by banks in the past, and makes important recommendations to make sure that banks work in the interest of their customers" - Michel Barnier

The French official continued, "The report underlines the excessive risks taken by banks in the past, and makes important recommendations to make sure that banks work in the interest of their customers."

The commission will now consider its next steps, and assess the impact that the recommendations will have on both growth and the safety of the financial services sector.

In the final report, Liikanen, a former European commissioner for budget, personnel and administration, recognised the task ahead, saying, "We are fully aware that this gives a great responsibility to the commission."

"It is now the task of the commission to assess the report, organise the appropriate consultation of stakeholders and, finally, make the decision on whether to present proposals on the basis of our recommendations."

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