LONDON Jan 23 Germany and France have attacked
European Union plans to curb mega banks, warning that this could
crimp a delicate economic recovery, a paper seen by Reuters
Next week, the European Commission will unveil a blueprint
to challenge the power of big banks, tackling one of the biggest
risks exposed by the financial crisis.
The paper does not name Germany and France as authors but
five financial industry and government sources told Reuters the
two and Italy, were behind it.
The European Commission is due to formally propose the draft
law to rein in risky trading on January 29, to apply lessons
from the 2007-09 financial crisis that forced taxpayers to bail
out lenders that had taken excessive risks.
Leaked versions of the draft law propose banning proprietary
trading at banks above a certain size.
Proprietary trading refers to banks taking bets on markets
with their own money rather than a client's. Other types of
trading such as complex securitisation and derivatives may also
have to be separated from a bank's deposit-taking arm.
"This approach could result in a lot of activities useful
for the financing of the economy ceasing to be provided by
European banks and migrating to third country players or to the
shadow banking system, jeopardizing the financing of the economy
in a crucial recovery phase," the paper says.
The German and French finance ministries had no comment.
Italy's representation in Brussels did not immediately respond
to a request for comment.