Banks: in January proposal from Brussels to stop speculative trading

The European Commission should present the proposal on January 15 or 22 to ensure that the large European banks do not risk being overwhelmed by proprietary speculative activities. This was indicated by EU sources. The proposal provides for the limited prohibition of large banks to carry out trading operations 'without any connection with the activity' of customers or risk hedging'. There will be about thirty European banks for which the prohibition could take place, the sources specify, confirming what was published this morning by the Financial Times. The thirty banks are those considered 'too big too fail'. According to EU sources, the proposal that the EU executive is preparing to discuss is still subject to some changes, but the substance of what has emerged so far should be confirmed. This is a proposal in many ways similar to the so-called 'Volcker rule' and it is no coincidence that the Commission waited for the American choice to be clarified towards the end of the year. According to what has emerged, the banking supervisors will decide whether certain trading activities create systemic risks for which they must be separated from the rest of the banking activity: the European Banking Authority (EBA) will provide the technical indications for this assessment . Any separation, which therefore will not be mandatory, but will be decided at the end of a predetermined path, may concern the activity of 'market making', the purchase or sale of derivatives which would be transferred to a separate entity with separate assets. In this case, the bank will be able to continue to sell standardized derivatives to cover the risk to insurance groups, non-financial companies, pension funds with an exposure that will have the limits established by the European Commission. The whole sovereign debt sector is excluded from the possible separation. The supervisory authorities (in the Eurozone the ECB) will be able to ask for stricter limits. According to the rumors circulating in these hours, the prohibition of trading on own account unrelated to the activity of clients or risk hedging and the possible separation will apply to banks 'too big to fail', of a predominantly systemic nature, and to subsidiaries including those located in third countries. Special treatment is envisaged for savings banks and cooperative banks. Commissioner Barnier's spokeswoman indicated that at the moment there is still no formal proposal from the Commission.