13 November 2012

EACB: Consultation on the recommendations of the High-level Expert Group on reforming the structure of the EU banking sector

Considering that the Liikanen Report contains recommendations to the Commission, EACB has refrained from asking for clarifications and has limited itself to more general remarks, as well as specific comments on the main proposal and other recommendations.

The European Association of Co-Operative Banks (EACB) took note of the Report of the High Level Expert Group (Liikanen Group) on Reforming the structure of the EU banking sector ('Liikanen Report') published on 2 October, 2012.

The cooperative banks subscribe to the intentions to foster prudent banking and take a stand against any and all forms of irresponsible, high risk banking. While EACB respects the mandate of the Liikanen Group to assess the EU banking sector and the necessity for a restructuring, EACB considers that the report and any follow-up should take account of the forthcoming regulatory reforms which may deem a mandatory restructuring redundant. Furthermore, there is a need to take account of the diversity in the EU banking sector and need for a sound impact assessment.

Respect and finalise ongoing regulatory reforms

EACB is of the opinion that the abundant regulatory reforms under way are to a large extent sufficient to ensure a safe and sound European banking system and could render further reforms for restructuring unnecessary. The forthcoming enhanced prudential requirements will ensure an increased stability and efficient banking system.

Acknowledgement of different business models and national markets

It is appreciated that the report provides a good summary of the causes of the financial crisis. EACB also welcomes that the Liikanen Group has analysed the different business models and stated in the Report that "the presence of cooperative banks have found a positive impact on the GDP growth in most countries" and “when determining ownership structures, co-operative business model may deserve separate consideration”.

However, these efforts to understand the specificities of business models are not reflected in the main proposal of the Liikanen group, nor in footnote 60, and seem to be undermined by the general conclusion that no business model has done better.

EACB would like to highlight that given the specificities of a cooperative business model like their ownership structure, cooperative banks weathered the financial crisis relatively well. It is necessary to acknowledge these differences in business models as it is the strength of the EU banking sector and necessary to maintain the integrity of the internal market.

Need for thorough impact assessment

Finally, the Liikanen Report does not provide for any assessment to underpin the financial sustainability of the ring-fenced trading entity, although this is a central issue. The highlighted alternatives for a separation of proprietary trading activities as proposed could be of interest, however the actual implications of for example Avenues 1 and 2 should be specified and discussed in more detail before a respective decision is taken.

In addition, final assessments of the economic cost and impacts and the impact in terms of competitiveness of the EU financial sector at global level are also lacking. EACB considers that any options, scenarios and/or avenues recommended should be based on sound impact studies with a clear rationale.

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