EU banks to dodge split of investment banking and retail arms

Bloomberg

European banks will probably dodge an attempt to force the separation of their investment banking and retail arms after the European Commission’s efforts to broker an agreement between lawmakers appear to have flopped.
The European Parliament’s negotiating team failed to make progress on the so-called bank structural reform bill in a meeting with commission Vice President Valdis Dombrovskis on Tuesday, according to Gunnar Hokmark, the assembly’s lead lawmaker on the file. Dombrovskis invited to the meeting last month to “help facilitate an agreement” and offered “technical assistance” for a compromise.
“Dombrovskis wanted to offer the services and the capacities of the commission and I think what came through in the discussion is that it’s a politically locked situation,” Hokmark said via telephone. “It’s more based on political differences than on the lack of help from the commission.”
The commission, the EU’s executive arm, proposed the bill as a way to boost financial stability by separating banks’ retail operations from riskier investment banking. The Council of the European Union, which represents national governments and forms one half of the bloc’s legislature, reached a negotiating position on the bill in June 2015. But parliament, the other half, has made little progress.
A proposal by Hokmark was rejected by the Economic and Monetary Affairs Committee in May 2015, and an attempted compromise collapsed later that year in the face of strong French-led opposition. Lawmakers since failed to develop ideas on how to bridge the gap between the two main political groups, the center-right European People’s Party and the Progressive Alliance of Socialists and Democrats.

Automaticity
“The left are calling for automaticity regarding separation and we don’t want that,” Hokmark, a member of the EPP, said. “We want stability and we want banks to be able to have investments in market making, liquidity making, which are important for financial stability.”
Jakob von Weizsaecker, a member of the parliament’s negotiating team from the Social Democrats, said he welcomed the commission’s effort to revive the file even amid difficulties of reaching an agreement, citing Deutsche Bank AG as an example of why it’s important to do so.
“The difficulties of Deutsche Bank in recent months have illustrated that the too-big-to-fail problem has not yet been properly addressed within the banking union,” von Weizsaecker said in an e-mail. “Therefore, the resumption of our conversation in parliament about bank structural reform is good news.”
A spokeswoman for commissioner Dombrovskis had no immediate comment.