LONDON, Feb 12 (Reuters) - European Union efforts to curb risk taking by banks look set to be weakened as key member states like Germany shield “universal” lenders from the more onerous rules, EU documents seen by Reuters on Thursday showed.
The EU reform aims to avoid blow-ups in trading blow-ups from bringing down the whole bank. But it has faced foot-dragging by countries like Germany and France which have introduced their own national reforms.
The European Commission’s draft law sets a threshold above which certain types of trading should be hived off into a new division.
Germany and the European Central Bank fear this would crimp useful trading activities such as market-making. Several states are also keen to preserve the universal banking model, which keeps all activities under one roof.
In a bid to break the deadlock, EU president Latvia has proposed a more proportionate separation process by relying heavily on criteria rather than size when it comes to deciding if trading operations should be hived off.
“This concept allows for a risk-based assessment of trading activities and relies much more on supervisory discretion as compared to the Commission’s bank structural reform proposal,” a document written by Latvia and seen by Reuters said.
“The concept is positively received by most member states as a compromise to develop further,” the document added. (Reporting by Huw Jones. Editing by Jane Merriman)