PARIS Dec 19 French President Francois
Hollande's long-awaited bank reform will be unveiled on
Wednesday, almost a year after his campaign pledge of a "long
war" against the financial sector.
The overhaul will ultimately hit only a sliver of banks'
profit, handing a victory to the likes of BNP Paribas
and Societe Generale, according to a leaked draft of
the bill, reflecting months of intense lobbying.
The draft reform requires banks ring-fence proprietary
trading activities in separate, self-funded entities by 2015,
while sparing activities such as market-making, hedging and
private-equity financing. Regulatory oversight of their
activities will be ramped up.
In principle, this is not far removed from recommendations
made in October by a European Union advisory group led by Erkki
Liikanen which called for the ring-fencing of a swathe of
trading activities. It is also similar to the U.S. "Volcker
Rule" which cracks down on proprietary trading.
France's reform defines prop trading so narrowly it leaves
much of the riskiness of banks intact, critics say, such as
sizeable derivatives portfolios and funding of risky investment
"This is worse than a backtrack," said Jerome Cazes, former
head of Natixis credit-insurance unit Coface. "It is
the minimum you can put in a law without blowing a raspberry to
Socialist lawmakers and senators have defended the
proposals, saying they will keep banks in line and protect
taxpayers from the cost of bailing them out while, at the same
time, protecting the stagnant economy from a body blow.
"The bank reform law will well and truly ... formally
separate banks' reckless activities," Socialist deputy Karine
Berger said in a column on Sunday, saying critics were
(Editing by Dan Lalor)