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Further Blow Dealt to Liikanen

The FT reports that the German finance ministry has proposed legislation dealing with banking reform that has been interpreted as a rejection of the concept of ringfencing as contemplated by the Liikanen report.  Instead, the draft bill would require banks to set up a separate unit for proprietary trading activities that accounted for either EUR 100 billion of assets or 20% of balance sheet.  If passed by the German parliament, the measures would likely come into force by mid-2015.

The draft bill largely mirrors French proposals, published in December 2012, to ringfence speculative trading activities.  However, it is in contrast to both the Vickers proposals in the UK (pursuant to which deposit taking activities would be ringfenced) and the Liikanen proposals (which require the ringfencing of all trading activities above a certain threshold).

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