Back
6 Jan 2014
EU's Barnier considers implementing ban on large banks' proprietary trading activities
FXstreet.com (Łódź) - According to the Financial Times, European Commissioner for Internal Market and Services Michel Barnier is preparing a proposal to ban around 30 large lenders from proprietary trading in an attemt to curb risky trading practices which could damage capital markets.
“Desks, units, divisions or individual traders specifically dedicated to taking positions for making a profit for own account, without any connection to customer activity or hedging the entity’s risk would be prohibited,” the draft proposal said.
Large financial institutions would also be forced to move such activities as “investment and sponsorship of complex securitization, sales and trading of derivatives” to a separately capitalized unit.
According to Marc Chandler, Global Head of Currency Strategy at BBH: “A key take away from the 'leaked' Barnier proposal is that many small and medium sized banks in Europe may be exempt from any division between lending and trading functions and the from bans on proprietary trading. The earlier proposals (from the Liikanen report) would have made all banks subject to such reforms.”
“Desks, units, divisions or individual traders specifically dedicated to taking positions for making a profit for own account, without any connection to customer activity or hedging the entity’s risk would be prohibited,” the draft proposal said.
Large financial institutions would also be forced to move such activities as “investment and sponsorship of complex securitization, sales and trading of derivatives” to a separately capitalized unit.
According to Marc Chandler, Global Head of Currency Strategy at BBH: “A key take away from the 'leaked' Barnier proposal is that many small and medium sized banks in Europe may be exempt from any division between lending and trading functions and the from bans on proprietary trading. The earlier proposals (from the Liikanen report) would have made all banks subject to such reforms.”