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Europe's biggest banks would be affected,
should these changes be brought in
|
A European
Union advisory group says that Europe's banks should be split into separate
legal entities, in order to protect ordinary retail banking from risky trading.
The review was set up to look at whether banks should be structurally reformed to avoid
another crisis.
The group
agreed that banks should separate certain high-risk banking activities from
everyday banking.
Banks
likely to be affected include Deutsche Bank and BNP Paribas.
The
report's suggestions echo those put forward in a report into the UK banking
sector by Sir John Vickers and proposals in the US, both designed to avert
further banking crises in these countries.
The EU's
report also looked at the risks of lending on properties, and recommends it
should be underpinned with larger capital reserves.
Bonuses
It also
examined ways of spreading the risk burden of a collapsed bank to a wider
group, so that bondholders, as well as shareholders and the state, would take
some of the losses in future.
It
suggested that bankers should accept such a bond, the value of which would fall
if risky trades or lending lost money, as part of their bonus.
The report
also says banks should have higher capital "buffers" to protect
against future banking crises.
The EU
report's plans, which the group said should be discussed before the end of the
year, are just one of a number of high-level reviews of the banking sector.
The report
will be passed to EU internal markets commissioner Michel Barnier, who will
make the decision on whether to present proposals in line with its
recommendations and whose officials write the first draft of new laws.
Mr Barnier
said: "The Commission will look at the impact of these recommendations
both on growth and on the safety and integrity of financial services."
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