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Barnier panel to look at Vickers for EU

Friday 25 November 2011 - by

Michel Barnier - photo by European Commission
A high-level committee to be set up by commissioner Michel Barnier will look at whether the UK's ring-fencing requirements could be applied to the EU as a whole.

A commission source told Global Financial Strategy that the committee will analyse the benefits of "moving from differentiation, to segregation and to separation" of banking activities.

"There are clearly pros and cons to that, there's a heavy cost in terms of structural implications if you separate, but there could obviously be benefits," they said.

The committee will aim to look at how best to isolate risk, ensuring that the commission has enough information before it takes a decision about the future structure of banks in the EU.

Explicitly referencing the UK's Independent Commission on Banking Supervision, the source added that questions remained about the working details of the final proposals.

"From a Vickers perspective we've always said that Vickers is applicable with EU rules...we have always said that we understand why the UK is doing this and we respect it.

"Whether at this stage we could think of it as the model for the rest of Europe, we don't know right now.

"We're willing to look at whether there are things to take from it or lessons to be learned."

In addition, provisions of the US Volcker Rule will be examined, they added, labelling the possible proprietary trading ban as "equally interesting".

If the Vickers model were to be implemented, questions remain about the whether the ring-fenced retail bank would have to pay for losses of the investment bank, and whether capital requirements could be lowered for retail banks that are taking less risk, the source added.

Details of the committee emerged during Michel Barnier's appearance earlier this week in front of the European Parliament. The source confirmed that the committee will consist of a "handful" of members from different sectors, and it will be expected to consult widely before issuing a final report either in late spring or early summer 2012.

Barnier is "not calling into question the universal banking system per se" but the committee will explore if there are better ways to isolate against risks, the source added.

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