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Finance Watch argues that a strong, simple without loopholes would make such a ban unnecessary.
Duncan Lindo, author of the Finance Watch response, said: “The ring-fence aims to protect taxpayers and essential services and reduce implicit government guarantees. We think a robust ring-fence is critical to the success of the bank reforms. Whether a ring-fence succeeds will depend, in part, on its simplicity. The US experience with the Volcker Rule shows that distinguishing between proprietary and other trading is far from simple: it requires a large and complex set of rules.”
“Complexity will lead to loopholes, making for a weaker ring fence. We propose not to attempt to ban proprietary trading but to concentrate all trading activities in a regulated, well-capitalised investment bank which is separated from other banking activities and subject to prudential control. In short: The simpler the rules, the stronger ring-fence the ring-fence.”
Thierry Philipponnat, Secretary General of Finance Watch, said: “The UK and European banking sectors continue to rely on sovereign support, whether through direct ownership, central bank liquidity or other measures. Far from imposing a cost on banking and hence on society, we consider that robust structural reform is key to stabilising the sector and would help to restore the flow of credit between banks and from banks to the real economy.”
Finance Watch response to PCBS