Structural Reform of the EU Banking Sector

Following the conclusions of the High-Level Expert Group (HLEG) chaired by Erkki Liikanen, the EU Commission has released in 2014 a proposal on the structural reform of the EU banking sector. The EU Commission proposal is articulated around two main principles:

  • The ban of proprietary trading, which is used for speculative purpose and has no link with depositors and real economy,
  • The potential separation of risky market activities other than proprietary trading, where more responsibility is given to the supervisor. If it is justified, the supervisor will impose a subsidiarisation of these activities.

The Luxembourg banking sector is mostly customer-related, focusing on the provision of banking services to its customers, i.e. retail customers, corporate customers, high net worth individuals, investment funds, institutional investors, etc.

As a priority, we consider that customer-related transactions should not be assimilated to trading activities, and that they should remain in the deposit bank. Customer-related transactions, encompassing the products and services provided to the full range of banks’ customers, create little or no risk at all for the bank because:

  • Where the bank acts as counterparty of the customer for a derivative transaction, it covers the risk by performing a transaction of opposite sense with another counterparty. As a result of these “back-to-back” transactions, the bank keeps in its books only the residual position, which corresponds to its margin on both transactions,
  • Where the bank acts as adviser or as agent, it is not counterparty to the transaction and incurs no risk at all.

Contact

Association des Banques et Banquiers, Luxembourg

Address

12, Rue Erasme L-1468 Luxembourg

Phone Fax
Opening hours

Monday to Friday from 8:00 to 17:30.