LONDON, Oct 3 (Reuters) - Suggested structural reforms to banks should be a cause for concern for investors because they do not go far enough, a top Bank of England official said on Wednesday, following recommendations by an EU advisory group for banks’ to separate retail from trading activities.
Andrew Haldane, the BoE’s executive director for financial stability, said there is a “strong case” for regulators stepping in to lessen the uncertainties over valuations across banks’ balance sheets, which could encourage investors to return to banks.
“At present, investors are pricing for a migraine. The problem for investors appears to be not so much too-big-to-fail as too-complex-to-price,” Haldane said in an opinion piece in the Financial Times.
Banking reforms, such as the recommendations announced by the Liikanen advisory group on Tuesday, would help “mobilise bank funding and lending”, when the economy needs it most.
In the United States, the “Volcker Rule”, the precursor to the publication of Independent Commission on Banking chief Sir John Vickers’ banking reform proposals in Britain, is aimed at preventing banks from taking risky bets for their own gain rather than on behalf of their customers.
“Today, the Volcker proposals in the U.S., the Vickers proposals in the UK and the Liikanen proposals in Europe envisage a similar unbundling of banking portfolios,” Haldane said.
“Despite the alarm some have expressed, if implemented faithfully and simply such structural solutions ought to help solve the too-complex-to-price problem, to say nothing of too-big-to-fail,” he said.