adminBRUSSELS. – The EU unveiled long-awaited plans to rein in the “too-big-to-fail” banks yesterday in what the bloc said was the final step towards preventing a repetition of the 2008 banking crisis. The reforms, affecting about 30 of the biggest banks, would stop them trading on their own account and force them to hive off some of their riskiest activities.
But they are watered down from a 2012 EU report that recommended making all banks completely ring-fence their day-to-day retail operations from the high-risk trading widely blamed for setting off the 2008 global crash.
France and Germany have warned against going too far with the reforms, saying national laws may be better and that too much meddling will hurt the fragile economic recovery.
EU Financial Services commissioner Michel Barnier, who unveiled the plans in Brussels, said they deal with the small number of very large banks which otherwise might still be “too-big-to-fail, too-costly-to save, too-complex-to-resolve.”
The proposals follow up on the 2012 Liikanen Report into separating banks’ riskier activities from their traditional role in ordinary, low-margin but largely safe retail banking.
The banking crisis that started with the collapse of Lehman Brothers and the ensuing eurozone debt crisis has prompted the European Union to adopt a whole series of banking sector reforms to tighten overall regulation and minimise excessive risk taking.
The EU’s proposals would stop the biggest banks from engaging in “proprietary trading” – trading with their own money for their own gain, as opposed for their clients. – AFP.
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