Friday

19th Oct 2018

Lawmakers set for battle on EU bank trading ban

  • EU lawmakers are set to battle over whether to ban 'too-big-to-fail' banks from risky trading practices (Photo: sachab)

Lawmakers are set to do battle over a draft law by the European Commission aimed at splitting risky trading practices from basic banking services in Europe’s banking giants.

Last January, former financial services commissioner Michel Barnier presented a bill on bank structure reform featuring a ban on so-called proprietary trading, where banks bet exclusively with their own money rather than customers' money, to be agreed and enforced by 2017.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Proprietary trading now only accounts for a small amount of banking activity but was used to create the market in sub-prime mortgage loans which led to the financial crisis in 2008-9.

This week, however, Gunnar Hokmark, the Swedish centre-right MEP who will lead the European Parliament’s negotiating team on the bill, unveiled plans to water down its main provisions on risky trading.

Deputies on the parliament’s powerful economic affairs committee will open their formal discussions on the bill in the coming weeks.

One of the assembly’s experts on banking, Hokmark in 2013 piloted EU rules on the resolution and winding up of insolvent banks which put shareholders and bondholders first in line to suffer losses

In a statement accompanying his amendments to the law, Hokmark said that preventing Europe’s banking giants from such trading “would not mean a rapid emergence of new channels for financing, but rather a slow development of new institutions and lending, and thereby a decline in investment”.

His amendments include provisions to allow banks to be involved in market-making such as offering investors somewhere to buy and sell shares.

“Systemic risks that we are exposed to in universal banks must be met by a risk based approach, not by deeming one business structure as a systemic risk when that is not the case and presuming that trading is more systemically risky than lending, which is not the case,” says Hokmark.

“Trading is a way of keeping assets liquid and to transform capital to lending and to distribute the risks of lending".

But the Swedish MEP’s plans were criticised by Finance Watch, an influential NGO which advocates financial sector reform.

On Thursday (8 January), Christophe Nijdam, its secretary general, said that 'too-big-to-fail' banking “distorts incentives so that Europe’s megabanks are more focused on financial trading than on financing commercial investments".

The NGO added that Hokmark’s plan would create a “shell regulation” and would “allow national discretion to undermine the single rulebook and single market”.

The banks themselves are keen for the law to be scrapped altogether by new financial services chief Jonathan Hill.

Banks should separate deposits from risky trading, group says

An expert group advising the EU commission has said banks in Europe need to separate their entities dealing with deposits from those trading with risky investments, in order to prevent a re-run of the 2008 financial crisis.

News in Brief

  1. EU to open trade talks with US on beef
  2. EU court orders Poland to suspend firing judges
  3. Japan to focus on circular economy at G20
  4. Italian budget 'significant deviation' from rules, says EU
  5. Podemos initiates debate on legalising marijuana in Spain
  6. Merkel: Focus on banking union at December EU summit
  7. Scotland confirms mad cow disease case
  8. European 'Green surge' set for repeat in Hessen election

Russian activist warns on 'fake news' as EU backs action

In 2015, internet activist Lyudmila Savchuk went under cover to expose a troll factory in St Petersburg. As the EU summit endorses anti-disinformation action, she told EUobserver the Russian government is bankrolling many more.

Stakeholders' Highlights

  1. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  2. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  3. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  4. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  5. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  6. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  7. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  8. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  9. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  10. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  11. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  12. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All

Latest News

  1. What Italy's budget row is actually about
  2. EU preparing 'concentration camps' for migrants
  3. Poland to respect EU injunction on judicial purge
  4. EU votes on Facebook and plastic This WEEK
  5. Top EU banks guilty of multi-billion tax fraud
  6. Polish left a glimmer of hope in fight against illiberal democracy
  7. Europe and Asia seek stable relations in troubled times
  8. Asylum reforms derailed, as EU looks to north Africa

Join EUobserver

Support quality EU news

Join us