The proposed European bank reforms could increase
shadow-banking activity, Erkki Liikanen, chairman of the
European Union High Level Experts Group has warned.
Explaining the key proposals of the group that is driving bank
sector reform in Europe in an
October 18 lecture at Frankfurts Goethe University,
Bank of Finland Governor Liikanen said the interplay between
the suggested reforms and shadow-banking activity would need to
The Liikanen Groups central recommendation is a
trading ring-fence for Europes biggest banks. This would
force banks to detach their risky trading activities from the
deposit-taking banks, if these activities amount to a
significant share of the banks business.
Liikanen said the impact of EU reforms on shadow...