The ECB ran a survey on the bank structure proposals that have been unveiled by the EU’s Michel Barnier.
Those cheeky chaps at Bloomberg have gotten a hold of it and it shows that banks are not happy with the strength of some of the proposals.
Their main gripe is that the rules forcing banks to separate some trading activities from their core business will;
“decrease liquidity in many asset classes and exacerbate the impact of financial shocks”
They also want changes to the text of the rules to clarify that no bank will be automatically forced to split under the new legislation.
The current proposal would see a ban on proprietary trading in around 30 of the EU’s most important lenders and contains a blueprint to split them up.
As usual the banks say the high costs of separating different parts of their businesses are detrimental and would most likely be passed on to customers. Some banks may deem the costs to high and a number of market makers would withdraw from various markets.
It’s a bit of a catch 22. Banks need the new rules to stop the kind of recklessness that got them into this pickle in the first place but it is going to come at great expense. If that expense is going to do too much damage to the bottom line then it becomes a worthless exercise for businesses. That potentially leads to some markets losing liquidity and that isn’t good for us traders.
Yes there’s plenty of chaff that wouldn’t be missed but there would no doubt be some run off into the markets we trade in the main. The one potential positive from that could be increased liquidity for big markets like FX, stocks, bonds etc as trading could increase in these markets to compensate for the loss of others.
In the meantime, the battle between profits and regulations continues. It might be worth keeping an ear out to see if it’s brought up at the ECB meeting later.
