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EU targets risky banking

January 29, 2014

The European Commission has proposed measures to rein in risky banking activities in heeding the lessons from the global financial crisis. It focused on stopping dubious trading by lenders "too big to fail."

https://p.dw.com/p/1Az10
EU Market Commissioner Michel Barnier
Image: Reuters

The proposals presented in Brussels on Wednesday centered on 30 large European banks, accounting for more than 65 percent of the EU's total banking assets.

According to the suggestions made, these lenders would be banned from proprietary trading, a practice under which banks make bets using their own money and not that of customers.

The lenders could be forced to also separate other risky trading activities from their deposit-taking business which would make them far less vulnerable in a crisis situation.

Striking the right balance

"The proposed measures will further strengthen financial stability and ensure taxpayers don't end up paying for the mistakes of the banks," EU Market Regulation Commissioner Michel Barnier said in a statement.

EU ministers agree banking accord

Critics argued the suggestions yet to be approved by the European Parliament shied away from a blanket ban on risky trading. But Brussels argued the rules must not interfere too drastically with banks' ability to finance the economy as the bloc struggles to leave the debt crisis behind.

"The proposals are carefully calibrated to ensure a delicate balance between financial stability and creating the right conditions for lending to the real economy, particularly important for competitiveness and growth," Barnier commented.

hg/kms (dpa, AFP)