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EU report: Deposits should be separated from risky banking

brussels bureau

EU report: Deposits should be separated from risky banking


Again, it is being recommended that high-risk investments and trading be separated from retail banking.

This time, the proposal comes from a new EU report looking at financial reforms and regulation. An advisory group led by Bank of Finland Governor Erkki Liikanen presented its findings to the EU Commission Brussels on Tuesday.

“Deposits and the explicit and implicit guarantee they carry would no longer directly support risky trading activities,” Liikanen said.

He added: “The longstanding universal banking model in Europe would and could, however, remain untouched since the separated activities can be carried out in the same banking group.”

The aim is to protect European savers and prevent further bailouts for the banks.

Specific charges for property loans are also being proposed, after crashes in Ireland and Spain caused financial troubles for lenders.

It is not the first time the idea of separating retail and speculative banking has been put forward.

Both the UK and the United States came to similar conclusions after each carried out their own investigations.

Following the findings of the Vickers Report in September 2011, Britain’s biggest banks have until 2019 to ringfence their high street banking businesses from their investment banking arms.

Dodd–Frank Wall Street Reform and Consumer Protection Act was passed in the US in July 2010. Amongst other reforms, it prevents banks from owning hedge funds for making their own profit because in the past this was done using depositors’ money.

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