Ahead of a
Liikanen review consensus, IFLR questioned market
participants as to whether a combined Volcker/Vickers
approach was right for Europes biggest banks. The
response was overwhelming: 75% of those polled disagreed with
The Liikanen review was established in November 2011 by EU
commissioner, Michel Barnier, to conduct a full-scale
analysis of Europes lending sector and recommend
banking reforms for the region. Publication of
the Committees findings are not expected until next
But there is increasing speculation the Review
will advocate the introduction of a hybrid model combining the US and the UK approaches to bank
reform. The US Volcker
approach bans proprietary trading
(when a bank trades on its own money). In contrast, the
UKs Vickerswill require major European banks to build a
firewall between consumer and investment banks.
According to one respondent in the
industry-wide survey, adopting a combined approach
would be a backward step, apparently designed
to protect voters. It ignores major and welcome
developments in finance and is not dissimilar to the outcry
which greeted the first inception of insurance and stock
exchanges several centuries ago, he said.
Another poll participant believed both Volcker
and Vickers would be unnecessary, and specified a preference
for a proprietary trading ban.
A UK market participant
agreed an EU Volcker equivalent made most sense.
It was likely, he said, the
French government would introduce a Volcker rule equivalent
by the end of the year to stop banks gambling with French
There is no way France
will allow its banks to be subject to something if no one
else in the region is suffering, said the same
Whats more, the
Volcker limit will only take two years to come into practice,
he said. In contrast, Vickers wont be ready until
He was puzzled by the UK
approach, he said.
If we get Vickers
here, we should have it on continent so that everyone
suffers, he said. As it stands we could face
having both legs broken: one by Vickers and one by an EU
Volcker. I dont understand why regulators didnt
A minority of 25% supported
the adoption of both Vickers and Volcker. But said the
industry was hopeful that the ringfencing mechanism
incorporated within this would only be activated in an
emergency - for example, if a bank is approaching failure.
Respondents said this model could be included in a
banks so-called living will - the plan to help
dismantle a bank during a crisis.
Survey participant also agreed that
investment banking would change regardless of what reforms
were eventually introduced. Shareholders want to see
more return and dont want investment banks to see all
the goodies, one respondent said. They will put
political pressure on banks to ringfence regardless of
A draft directive from the
EU is expected in summer 2013.
IFLR will be
tracking the systemic and legal backlash of this with
interest. Follow us at www.twitter.com/IFLR_online for the latest on
developments as they happen.
the purpose of this poll, IFLRs team of journalists
surveyed private practice lawyers and in-house counsel at the
biggest law firms and investment banks in Europe, the UK and
collating the responses, journalists conducted interviews
with counsel at a selection of law firms and banks. Their
comments have informed IFLR's analysis.
the policy of IFLR to guarantee counsel and institutions
participating in our surveys complete anonymity. IFLR will
not disclose the law firms or banks that replied to
questionnaires or agreed to interviews.