| Author (Corporate) | European Commission |
|---|---|
| Series Title | COM |
| Series Details | (2014) 43 final (29.01.14) |
| Publication Date | 29/01/2014 |
| Content Type | Policy-making |
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Since the start of the financial crisis, the European Union and its Member States have engaged in a fundamental overhaul of financial regulation and supervision. In the area of banking, the Union has initiated a number of reforms to create a safer, sounder, more transparent and responsible financial system that works for the economy and society as a whole. However, the Union banking sector remains large in absolute (€42.9 trillion) and relative terms (nearly 350 per cent of Union GDP). The individual size of the largest Union banks by assets is roughly similar or close to the GDP of its home country. These banks still remain too-big-to-fail, too-big-to-save and too-complex-to-resolve. In this context, Commissioner Barnier announced in November 2011 the setting up of a High-Level Expert Group ("HLEG") with a mandate to assess the need for structural reform of the Union banking sector, chaired by Erkki Liikanen, Governor of the Bank of Finland. The report was presented in October 2012 stating that bank restructuring is necessary to complement existing reforms and recommending the mandatory separation of proprietary trading and other high-risk trading activities into a separate legal entity within the banking group. The separation would be mandatory only for banks where the activities to be separated amounted to a significant share of the banks business. On 3 July 2013, by large majority the European Parliament ("EP") adopted an own initiative report called "Reforming the structure of the EU banking sector" that welcomes structural reform measures at Union level to tackle concerns on “Too-Big-To-Fail” ("TBTF") banks. This proposal represents a critical part of the Union response to tackling the TBTF dilemma. It aims at preventing the residual unmanaged risks in the Union banking system from materialising. It will curtail the artificial expansion of banks' balance sheets, particularly those activities of a purely speculative nature, thereby reducing the risk that tax payers have to step in to save failing banks, and reducing the cost and complexity of any resolution when required. It is also an important complement to the Directive establishing a framework for the recovery and resolution of credit institutions and investment firms. This proposal is accompanied by a directly related proposal to tackle another conduit for financial contagion – namely, interconnectedness among market participants including systemic banks through opaque trading links in securities financing transactions. |
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| Source Link | http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2014:043:FIN |
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| Subject Categories | Business and Industry |
| Countries / Regions | Europe |
