It was one of the main campaign promises of French President François Hollande, in his famous Le Bourget speech in January 2012: reforming the banking system and draw a line, as clear as possible, which separates the traditional activities of credit institutions from the speculative ones. Almost a year later, the tenant of the Elysium is expected at the point: his proposal to reform the banking system is presented today by the Council of Ministers. But what is its content? And above all, does it respect the stated objectives?
The principle announced by Hollande eleven months ago was clear: separate retail banking services, which can be accessed by anyone, from investment banks, which have more sophisticated and often speculative activities, and are aimed at insiders and large international investors. Above all, this separation should encourage banks to exercise more restraint, but also and above all prevent the States from having to save them from bankruptcy every time, especially when it was precisely the market departments that led to the bankruptcy. In the event of a new financial crisis, the State should therefore bail out only and exclusively the traditional banks, and not those specialized in speculation.
Compared to the interesting and shareable premise, the text presented today in the Council of Ministers appears rather watered down: the activities targeted, according to what the Minister of Economy Moscovici himself said, are much less numerous than initially foreseen and above all they will not be managed by a different bank but simply by a separate branch, with the ever imminent risk of contaminating the accounts of the "parent company" and forcing the State into yet another “cumulative” bailout.
However, the law introduces two innovations up to expectations, starting with ban on high frequency trading (HFT), whose activity consists in programming computers so that they realize, thanks to their speed, small but numerous gains. In such a system, speculation is no longer even manual but even automated, dramatically increasing the risk of contagion. Other activity that will be prohibited by the Hollande law, are transactions carried out on their own account by banks on the agricultural commodity derivatives market.
Overall, however, the reform is judged by many to be disappointing: first of all by the NGOs, then by many insiders, such as a banker who told AFP under anonymity that the new law "will change very little: it will be limited, so as not to create too much embarrassment for French banks". Yes, because if the Elysium has deliberately chosen not to rage, the reason is very simple: to preserve the transalpine banking sector from international competition, which instead would continue to act under the current rules. Not to mention the Basel 3 program, which already obliges European institutions to become more financially solid. In short, the one launched by Hollande with this initiative is a small and appreciable signal, but with the caution of those who know that he cannot go and break too many eggs in the basket. Will it be effective?
