In our Europe Update of June 2012, we reported that the European Commission set up a High-Level Expert Group (HLEG) on banking reform. The HLEG was asked to advise on the question whether, in addition to on-going regulatory reforms, structural reforms of EU banks would strengthen financial stability and improve efficiency and consumer protection. The HLEG, chaired by Erkki Liikanen, published its recommendations on 2 October 2012. Recommendations include:

  • separation of certain trading activities from the deposit bank
  • drawing up and maintaining recovery and resolution plans, as proposed in the Recovery and Resolution Directive
  • using designated bail-in instruments to increase (i) transparency of the balance sheet and (ii) the loss absorptive capacity
  • application of more robust risk weights for determining minimum capital standards
  • augmentation of existing corporate governance reforms.

The European Commission held a public consultation on these recommendations and is currently considering its follow-up to the recommendations.