Finance Watch argues that a strong, simple ring-fence without loopholes would make such a ban unnecessary.
- Download the response here.
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 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.”
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NOTES FOR EDITORS
UK: On 4 February 2013, the Financial Services (Banking Reform) Bill was introduced to Parliament. The legislation is supposed to be in place by the end of this Parliament (2015), and banks will be expected to have implemented reforms by 2019 at the latest. The full text of the Financial Services (Banking Reform) Bill can be found here: http://services.parliament.uk/bills/2012-13/financialservicesbankingreform.html
EUROPE: Finance Watch’s consultation response, dated 13 November 2012, to the European Commission’s Consultation on the recommendations of the High-level Expert Group on reforming the structure of the EU banking sector (Liikanen Report) can be downloaded from: Finance Watch response to Liikanen (pdf, 12 pages)
FRANCE: On 29 January 2013, Finance Watch released a document proposing amendments to the French proposals for the separation and control of French banking: http://www.finance-watch.org/wp-content/uploads/2013/01/Analyse_et_amendements_loi_bancaire_Finance_Watch.pdf (in French), 2 page summary in English: http://www.finance-watch.org/wp-content/uploads/2013/01/Loi_Bancaire_Resume_2Pages_FINAL-ENGLISH.pdf