22 January 2015

European Voice: MEPs divided over breaking up the eurozone’s biggest banks

MEPs revisited the causes of the 2008 financial crisis on 21 January as they debated new rules that could lead to some of Europe’s largest banks being broken up. Centre-left and Green members accused the centre-right of being unwilling to take on banks that they describe as “too big to fail, too big to save and too big to resolve”.

Many MEPs believe that the revision of the law advanced by Gunnar Hökmark, who is the European Parliament’s lead rapporteur on the matter, ignores the lessons of the financial crisis, namely that risk-taking universal banks – like Royal Bank of Scotland in the UK, or Bankia in Spain – pose a systemic risk to European economies.

“Some are arguing that after producing an alphabet soup [of financial regulators] we should stop regulating and focus on growth,” warned Jakob von Weizsäcker, a German MEP co-ordinating the centre-left’s position.

By contrast, Hökmark, a Swedish centre-right MEP, argued that universal banks ought to be cherished rather than broken up. “We cannot say that universal banks as such, by being more universal are more risky, rather it is the other way round,” he said. However, lobby group Finance Watch said Hökmark’s amendments would “hollow out” the Commission’s 2014 proposal, leaving an “ineffective shell regulation”.

Sylvie Goulard, a French MEP who is co-ordinating the liberals’ response to the proposal, offered some support for Hökmark. “It is good that it takes into account growth and investment,” Goulard told the committee. “We [also] need to preserve the competitiveness of our investments and financial institutions.”

Syed Kamall, a British MEP from the European Conservatives and Reformists (ECR), said his group broadly support Hökmark.

Michel Barnier, the European commissioner for internal market and services 2010-12, proposed a year ago that the European Central Bank should have the power but not the obligation to break up banks over a certain threshold, which would have captured 30 of the EU’s largest banks. Estimates are that Hökmark’s amendments would reduce the number of affected banks to below ten.

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