Response to the EC Consultation on the recommendations of the Liikanen Group on reforming the structure of the EU banking sector

EuroFinuse agrees with the general recommendation of the Expert Group on the necessity of legal separation between risky financial activities from deposit-taking activities within a banking group. We agree as well that this separation should be aimed at protecting their socially most vital parts, which indeed are deposit-taking and those related to the provision of funding to the non-financial sectors of the economy. However, we consider that further consideration should be made on how this separation should be made. We doubt that the emphasis should be on separating the most volatile and risky part of the business from the retail part of banks. Instead we should focus on isolating the retail part of banking institutions and leave the rest of the activities outside the wall. This would reduce the incentives for the financial industry to lobby for keeping more risky or speculative parts of the business together with retail banking activities and consequently benefit from cheap funding for those activities that have no direct link with the real economy.

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