Friday

25th May 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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

EU tells UK to stop with Brexit 'fantasies'

After the latest round of Brexit talks, a senior EU official sounded the alarm bell: progress on the key Irish border issue remains elusive, while the London government is chasing pipe dreams.

Analysis

A good day for Russia in Europe

Russian firm Gazprom is a reformed character, the European Commission has said, improving the climate for more pipelines to Europe.

New GDPR enforcer says complaints imminent

The European Data Protection Board is a new EU body tasked with enforcing the EU's privacy laws with powers to impose massive fines. Its head Andrea Jelinek told reporters complaints against companies are expected to be immediate.

Debt relief talks mar Greek bailout exit

While the Greek government has committed to fulfill the last creditors' requirements in the coming month, Europeans and the International Monetary Fund are still far from an agreement on measures to reduce the country's debt in the future.

Debt relief talks mar Greek bailout exit

While the Greek government has committed to fulfill the last creditors' requirements in the coming month, Europeans and the International Monetary Fund are still far from an agreement on measures to reduce the country's debt in the future.

Analysis

A good day for Russia in Europe

Russian firm Gazprom is a reformed character, the European Commission has said, improving the climate for more pipelines to Europe.

News in Brief

  1. Italy set to pick eurosceptic finance minister
  2. UK foreign minister fooled by Russian pranksters
  3. Rajoy ally gets 33 years in jail for corruption
  4. Close race as polls open in Irish abortion referendum
  5. Gazprom accepts EU conditions on gas supplies
  6. Facebook tells MEPs: non-users are not profiled
  7. Commission proposes ending France deficit procedure
  8. UK households hit with Brexit income loss

Stakeholders' Highlights

  1. Counter BalanceEuropean Ombudsman requests more lending transparency from European Investment Bank
  2. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  3. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  4. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  5. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  6. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  7. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  8. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  9. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  10. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  11. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  12. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach