Banks are warning that forcing them to separate some client-focused trading services from their core business would “decrease liquidity in many asset classes and exacerbate the impact of financial shocks,” according to a summary of comments submitted to the ECB and obtained by Bloomberg News.
Lenders are also calling for changes to the text to make it clearer that no bank will be automatically forced to split under the legislation, unveiled earlier this year by Michel Barnier, the EU’s financial-services chief. “Only the supervisor’s assessment should provide the final decision,” according to the June 12 summary document.
The proposal would ban about 30 of the bloc’s most systemically important lenders from proprietary trading and set out a blueprint to split them up according to EU-level standards, following a review by supervisors. The split would push certain kinds of derivatives and other trading activities into separately capitalized units.
Banks say mandatory separation of market-making will lead to “higher costs that would either have to be passed on to end users, and/or a number of market-makers would possibly withdraw from this activity as they would not set up costly separate trading entities,” according to the ECB document.
Full Article: Bloomberg Businessweek
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