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This consultation paper outlines the main building blocks of the Commission's follow-up of the report of the High-level Expert Group on reforming the structure of the EU banking sector. It is divided into three parts. The first outlines the problem that bank structural reform could address. The second assesses the necessity of EU action in terms of subsidiarity. The third presents the main options under consideration. Each section is accompanied by questions where the Commission services would welcome the views of stakeholders.
This document focuses on the structural separation recommendation of the Liikanen High-Level Expert Group (HLEG). The other recommendations of the HLEG have been at least partially taken on board in other initiatives such as the Bank Resolution and Recovery Directive (additional separation of activities conditional on the recovery and resolution plan; use of bail-in as a resolution tool) and Capital Requirements Directive/Regulation (corporate governance requirements), or will only become actionable after the completion of ongoing exercises (e.g. Basel Committee’s fundamental review of trading book capital requirements).
In light of the problem definition set-out in section 1 and the focus on Too-Big-To-Fail (TBTF) banking groups, it is clear that any regulatory action on bank structural reform would only affect a small subset of the approximately 8,000 banks incorporated in the EU (see section 3.2.1). It would in particular exclude the vast majority of local and regional banks that serve the local economy as well as the banks that focus on customer-related lending. Moreover, any decision to potentially impose separation requirements would not necessarily apply automatically to banks exceeding examination thresholds and may imply some degree of supervisory discretion.
Respondents from relevant banking groups are as a matter of priority requested to provide data to substantiate their assessment of the impact of structural reform by completing the tables in appendix 1 (Excel format). Such data submissions are in particular encouraged from EU banking groups with the highest degree of systemic importance.1 The tables outline two scenarios for the purpose of informing the assessment of the set of options being considered by the Commission services. For the purposes of quantitative analysis, these scenarios incorporate a number of constraints and assumptions intended to ensure the tractability and comparability of the data, e.g. transition deadlines, geographical scope, etc. These scenarios do not prejudge the policy choice to be made by the European Commission at a later stage.
The consultation will run until 3rd July, 2013.