The key points from our response include:
- Separation will render banks more resolvable in the heat of a crisis.
- A strong EU proposal will avoid “a race to the bottom” via weak national initiatives.
- Market making and underwriting are trading activities and should be separated from deposit-taking, along with other capital market activities.
- The private costs of bank structural reform will bring large social benefits by limiting the cost of future banking crises and reducing the economic distortions caused by bank funding subsidies.
- Ex-ante bank separation is necessary to achieve the goals of bank structure reform; separation cannot be left to the discretion of national supervisors.
- The Commission’s Option E (HLEG) is the minimum approach to be considered, and Options H and I, where all trading activities are separated from a narrow deposit-taking entity, are the preferred approaches from a public interest point of view.