EU’s too-big-to-fail banks could face tougher rules
(18 June 2015 – Europe) A draft European Union law could mean banks with annual trading activities over €100 billion (A$145 billion) would face added scrutiny from supervisors looking to impose more capital rules and separation powers.
Envoys from the EU’s 28 national governments discussed how the bloc should deal with too-big-to-fail banks on 17 June.
Latvia, which currently holds the EU’s rotating presidency has proposed that supervisors vet lenders that surpass the trading threshold and decide if their investment-banking activities are “excessively risky.”
Under the proposal, the threshold would be measured as an average over three years.
Bloomberg reported that a European Commission document it obtained from 5 June, identified 14 banks as being over the €100 billion limit.
These are: Deutsche Bank AG, BNP Paribas SA, Royal Bank of Scotland Group Plc, HSBC Holdings Plc, Barclays Plc, Societe Generale SA, Credit Agricole Group, Banco Santander SA, Groupe BPCE, UniCredit SpA, Nordea Bank AB, ING Bank NV, Commerzbank AG, Danske Bank A/S.
Last year the European Commission – the EU’s executive arm – determined that existing bank regulations put in place following the 2008 collapse of Lehman Brothers was sufficient to tackle risks associated with the bloc’s biggest banks.
In January last year, the Commission made proposals on how supervisors should assess banks to determine if they should be broken up, nations have been redrafting these plans and the final law would have to be approved by national governments and the European Parliament to reach the statute book.
While the original commission plan focused on possible separation, “the compromise text contains a wider tool box” that supervisors can choose from, according to the documents.
These options include the ability to impose capital surcharges on banks and to take “other prudential measures.”
This should lead to a “more proportionate treatment” of banks.
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