Translated from the German
On Wednesday you will be presenting your plans to restrict proprietary trading by banks. This was originally planned for the past year. Is the pressure put on you by the financial lobby to blame for the delay?
Pressure does not affect me. I have 200 employees who are working on the regulation of the banking sector and have been extremely busy in recent months.
Why are you not proposing a banking system where commercial and investment banking is separated?
No one has proposed breaking up the banks, neither did the expert group report led by the Finnish central bank governor Erkki Liikanen. In some respects, our proposal will go even further than the Liikanen report. We aim to restrict the very risky proprietary trading rigorously.
US Treasury Secretary Jack Lew criticised the European resolution mechanism for being too little too late.
I always listen attentively to American encouragement. However, we will see this year how Europe and America are making progress with the implemention of the G20 decision. Then it will be obvious who is a step ahead. I have submitted 28 proposals for legislation on financial market regulation in my term. We are not idle here.
This year, the European Central Bank (ECB) will carry out a review of the banks' balance sheets, followed by a stress test. What do you expect from these?
I am sure that the ECB will conduct a very careful and precise analysis. It is likely that in one way or another weaknesses will emerge in some banks. That is the point of the exercise. The institutions concerned will have to restructure and inject capital.
It is still unclear who will jump in when the banks need new capital.
The States have agreed that there will be backstops, meaning public safety mechanisms. But it is not sure yet whether this will even be necessary. In the past three years, the largest banks have been able to generate €400 billion of capital in the markets. Basically, I believe that the big European banks are just as well capitalised as the American banks. However, it can never be ruled out that state aid might be necessary. But if this were to be the case we have clear rules.
Full article (in German)
Meanwhile Reuters reports that France and Germany said on Monday banks should ring-fence speculative activities from other business lines rather than be banned from them outright, setting out their position ahead of European Commission proposals aim at limiting risk. On Wednesday the EU executive will propose a draft law to rein in risks from trading at banks to make it less likely taxpayers will have to bail out lenders if trading bets go wrong.
The draft law is expected to propose an outright ban on speculative trading for the bank's own account - so-called proprietary trading - rather than simply ring-fence such activities as Germany and France suggest.
"We have confirmed our agreement in principle on the separation of speculative banking activities", French Finance Minister Pierre Moscovici said after a meeting of the French and German finance ministers and central bankers in Paris. The French minister further said their laws were already perfectly in harmony with the so-called Liikanen report, which the Commission is using for inspiration and calls for separation of speculative activities into their own division of the bank.
While such an arrangement allows speculative activities to be under the same roof as other parts of the universal bank model, the Commission is believed to want to go further with the proposal to ban speculative or proprietary trading. Last week Reuters reported that France and Germany also wanted more lenient treatment of non-speculative trading activities at banks as they worry that over strict rules could hamper lenders' ability to funnel financing to the economy.
Full article © Reuters, 27.1.14
Joint Statement by the French-German Economic and Financial Council (FGEFC) © Ministère de l'Économie et des Finances, 27.1.14
© Handelsblatt
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