Our work

Bank structural reform

The Bank structural reform workstream was tasked with steering the IRSG's response to the European Commission's proposal on structural measures to improve the resilience of credit institutions. The key goal for this workstream was providing technical input during the co-decision process to ensure the final rules would allow banking groups to continue to operate efficiently, without undue restrictions on their activities or inappropriate capital allocation requirements. 

A major issue was how in practice any derogations are implemented for Member States that have structural reforms in place. For example, under the current proposals the UK would be exempt in so far as it applies Vickers but it would need to introduce an outright ban on proprietary trading. Moreover the position of banks in the UK that fall outside Vickers but within the scope of the EU proposals is unclear: would they be exempted, would they have to meet the Vickers’ rules or would they be subject to the EU rules?

Background

In February 2012, the Commission established a High-level Expert Group, chaired by Erkki Liikanen, to determine whether structural reforms of EU banks would strengthen financial stability and improve efficiency and consumer protection. The Group started work in February 2012 and presented its final report to the Commission on 2 October 2012. The Commission examined the reform options, and adopted a proposal for a regulation on January 2014, which included a ban on proprietary trading, and for investment banking activities to be ring-fenced over a certain threshold. This follows a number of moves by different jurisdictions to introduce structural reforms to the banking sector, including the Volcker rule in the US, the Vickers reforms in the UK and banking laws in both France and Germany.