EU's Barnier defends market-making role for banks

PARIS Wed Jan 30, 2013 3:00am EST

Michel Barnier, the European Commissioner in charge of regulation, speaks at a news conference in Brussels October 2, 2012. REUTERS/Eric Vidal

Michel Barnier, the European Commissioner in charge of regulation, speaks at a news conference in Brussels October 2, 2012.

Credit: Reuters/Eric Vidal

PARIS (Reuters) - European Commissioner Michel Barnier has voiced caution over calls to separate some high-risk trading operations within banks from their so-called market-making role, according to a newspaper interview published on Wednesday.

Market-making activities, where financial institutions quote prices at which they will buy or sell securities, are crucial to the broader economy, the EU internal market and services chief told the Financial Times.

His comments appear to bolster industry criticism of an advisory group led by Bank of Finland Governor Erkki Liikanen, which said banks should split off trading on their own behalf from "activities closely linked with securities and derivatives".

Institutions like BNP Paribas (BNPP.PA) and Deutsche Bank (DBKGn.DE) are critical of proposals to separate some investment banking and trading from their commercial banks, arguing the "universal bank" model helps key clients and boosts economic growth.

"I don't want to penalize the work of banks when they work for the benefit of the economy and industry," Barnier told the Financial Times. "Clearly a part of market-making is linked to supporting the industry and the economy."

European officials were working on a "precise impact analysis" of the Liikanen report, Barnier told the paper.

(Reporting by Christian Plumb; Editing by Mark Potter)