|
|
Chaotic ’Bank Restructuring’ debate in Europe
1 February 2013
(EIRNS)—Developments just over the past few days provide ample evidence that if one refuses to accept the Glass-Steagall principle as reality, a descent into chaos is pre-programmed. Meanwhile, there are numerous Liikanen variants of "bank separation" under discussion, and with the German Ministry of Finance announcing yesterday draft legislation "for the protection of savings and deposits" which it wants the German cabinet to pass on Feb. 6, the scene in Europe is getting even Whereas the British government seems committed to its own, but much watered-down version of the Vickers Report’s recommendations for bank restructuring, the French government has something up for parliamentary debate and passage, which is somewhere between a watered-down Vickers and Volcker Rule—many also call it "Liikanen Lite." EU Commissioner Michel Barnier, who mandated the Liikanen Group, opposes central features of the group’s report; ECB President Mario Draghi opposes Liikanen as well, but some people on his own staff favor something that comes close to Liikanen, but also favor a timetable that is way off the one that Liikanen himself sets; namely, to have separation of some banking aspects by the end of this year. None of these variants under discussion touches the speculative markets or raises major obstacles to investment bankers. The German Finance Ministry draft would force banks to split off proprietary trading from other activities, and nominally protect savings accounts and normal deposits from high-risk trading. But the draft avoids any "ring-fencing," and only forces banks to do the split-off when their high-risk trading either exceeds 20% of the balance sheet, or is above EU100 billion. And with the exception of certain new regulations for high-frequency trading, all other bank activities stay untouched by the draft. There is nothing which the banks really have to fear, with this draft. The new German rule would apply to basically three German banks: Deutsche Bank, Commerzbank, and LBBW. It is also ominous that the German draft, similar to the other ones being discussed in Europe now, pays no attention to the real economy nor to the need for productive credit—it is concerned only with unproductive credit in the form of continued bailouts. (rap) |