Compromise banking

7 January 2014 By Dominic Elliott

The latest thinking in the European Commission is for an outright ban on prop trading, emulating America’s Volcker rule, with ring-fencing for other trading, imitating the UK’s Vickers proposals. The compromise has the single market in mind. But it will need careful calibration.

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European banks may be banned from proprietary trading and forced to split off their market-making operations if the volume of their relevant business breaches pre-defined thresholds, according to two people who have seen a draft European Commission proposal for new regulation.

The Commission said in an emailed statement on Jan. 6 that it would publish its final proposal “in the next few weeks” and that any text was “subject to substantial change” before then. It added that the proposal would stop all banks in the region from being “too big to fail.”

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