On 6 May 2013, the EU Commission published a roadmap regarding a proposal for a structural reform of EU banks (i.e. the Liikanen reforms). This followed the publication, on 2 October 2012, of the final report of the High-level Group on reforming the structure of the EU banking sector, chaired by Erkki Liikanen, a summary of which can be found here.
The main issues being considered by the Commission are:
- The definition of relevant activities to be separated from deposit-taking entities. This could include:
- proprietary trading;
- market-making; and
- securities underwriting.
- The nature and extent of separation and governance of separated entities. Available options include:
- functional separation (also referred to as “ring-fencing” or “subsidiarisation”);
- accounting separation; or
- full ownership separation.
- Thresholds and de minimis exemptions. These are likely to be based on:
- bank balance sheet size; or
- share of trading activities.
Consideration will also be given to:
- the treatment of derivatives business (as principal or as agent);
- the treatment of non-EU assets; and
- exposures to hedge funds and private equity funds.
A further public consultation will be launched in early May 2013 and a meeting of stakeholders is due to be held on 17 May 2013. Thereafter, as per its recent update, the Commission intends to adopt a legislative proposal in Q3 2013, although it is not yet certain whether that proposal will take the form of a Directive, a Regulation, or a combination of the two.