European Commission to probe structure of banks

Mon Jan 16, 2012 12:27pm EST
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By Huw Jones and John O'Donnell

LONDON/BRUSSELS (Reuters) - The European Commission launched a review of its policy on bank structure on Monday, a move that follows hard on the heels of Britain's radical plan to ring-fence the assets of savers against losses from risky investment banking.

The review will be headed by Erkki Liikanen, the governor of the Bank of Finland, the commission said, kicking off a process that could herald more intrusive regulation and upset governments that want to maintain responsibility for their own banks.

So far, new European Union rules for banks have been limited to setting the amount of capital they should keep to cover losses or to regulating how they trade.

But Michel Barnier, the French commissioner in charge of financial reform for the EU, is pushing for ever deeper reforms.

He outlined plans last year for the committee to look at, among other things, Britain's plans to ring fence the deposit-taking arms of its domestic banks with extra capital.

"I expect this group to make all the recommendations as regards the structure of EU banks it deems necessary to strengthen financial stability and enable banks to fully play their role in favor of the Single Market and European growth," Barnier said in a statement.


Few expect the new group, which is due to report back by the middle of the year, to recommend splitting lenders into separate retail and investment banking arms.   Continued...