The push to force international banking groups to restructure their businesses to separate retail and investment-banking activities is yet another example of regulators’ determined assault on too-big-to-fail: the cost is the balkanization of the global banking model. Bankers fear wasting billions on overlapping and incompatible rules on bank structures both within the EU and between the US’s Volcker Rule and the EU’s proposed ring-fencing.
The stakes are high. Sharon Bowles, the former chair of the economic and monetary affairs committee of the European Parliament from 2009 until July, says inconsistent proposals at EU level could take a while to resolve, which could, in turn, exacerbate the eurozone credit crunch.
Bankers have been pushing back to little avail since the October 2012 publication of the Liikanen report, compiled by a group of experts led by Finnish central bank governor Erkki Liikanen. The report accepted bank structures were not the main driver of the financial crisis, since it ravaged both cross-product universal banks and broker-dealers, but nevertheless proposed regulatory redress.