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Liikanen – the Results are In…

On 17 October 2013, the EU Commission published a list of the individual responses it received to its May 2013 consultation on “Reforming the structure of the EU banking sector” (see this blog post for more information), together with a summary of those responses.

The truly non-shocking conclusion to be drawn is that the banking sector is overwhelmingly against the structural reform programme.  It believes that the case has not been made for any form of legal, economic or ownership separation.  Moreover, to the extent that structural reform is needed at all (a conclusion which is disputed), it encourages the EU to construe the requirement as narrowly as possible – asking that it applies only to proprietary trading activity.  The industry also maintains that deposit entities should continue to be able to provide risk management products, such as simple derivatives, to their customers.  In their opposition to the Liikanen proposals, the banks find themselves supported by their corporate customers, who appear concerned that structural reform will affect their access to low cost financial services.

Equally unsurprising, is the fact that most consumers and consumer representatives adopt the polar opposite view.  They are steadfast in their support of the structural reform programme, encouraging the EU to allow Member States to enact super-compliant standards if they so choose, supporting the separation of all investment bank activities and objecting to the possibility that a deposit bank should be able to provide risk management products.

Given the need to balance the demands of the voting public against the realpolitik of economic recovery and the banking lobby, who would bet against a “compromise” solution emerging here?

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