EU high-level group to study banks structure

BRUSSELS (Reuters) - The European Union's executive will set up a high-level group to study the structure of banks and report back next year, the bloc's financial services chief said on Tuesday.

EU Internal Market Commissioner Michel Barnier said it would be modeled on the group headed by former IMF director general Jacques de Larosiere that led to radical changes in financial supervision.

The group will start work in the next "few weeks and months" to see what lessons can be drawn from the crisis and reforms such as those in Britain.

Next month the UK government is expected to propose a draft law to "ringfence" the retail arm of banks with capital so that deposits are safe at all times.

"It will have a look on that subject of structure of banks and separation in risk management," Barnier told the European Parliament's economic affairs committee.

The group is expected to report back in 2012.

"I hope it's going to be open ended in regard to conclusions," Barnier said.

Proposals to split up Europe's universal banks -- where investment banking and retail deposits are part of the same group -- would likely be opposed by countries such as Germany and France, and the UK reform stops short of breaking up lenders.

Barnier will also make a legislative proposal next year to regulate "shadow banks" such as money market funds and special investment vehicles, seen by supervisors as too lightly regulated.

He also plans to publish "as soon as possible" a draft law on better coordination among supervisors in winding down ailing banks and without relying on more taxpayer bailouts.

Barnier wants to force losses on bondholders of a bank but is worried this will further spook markets at the present time and has delayed his plans.

RATING BAN REINSERTED?

Lawmakers told Barnier they will propose amending his draft law to regulate credit rating agencies, published last week.

Some lawmakers want to reinsert Barnier's original proposal to temporarily ban sovereign debt ratings of countries in exceptional market circumstances.

He was forced to ditch this from the final draft law for further work after opposition from several fellow commissioners.

Jean-Paul Gauzes, a French center-right member from parliament's largest political bloc, will table amendments.

"It's important to act. We will be going further," Gauzes said, adding that countries in the euro zone deserved to have specific arrangements to protect them in troubled markets.

Italian center-left lawmaker, Leonardo Domenici, who will steer the measure through parliament, said the draft law had been weakened by the ratings ban omission.

"It wouldn't be the first time that parliament would actually improve the proposals that were originally brought forward by the Commission," Barnier said.

(Writing by Huw Jones; Editing by Will Waterman)